Hungarian Forint: Domestic improvement versus global headwinds – ING

ING’s Frantisek Taborsky reports Hungary’s new fiscal path projects the deficit falling to 2.8% by 2030, aligned with Euro adoption plans, while the National Bank of Hungary keeps rates at 5.50% and stresses caution amid global uncertainties. EUR/HUF trades in a tight 362–364 range, with positioning corrections and future direction seen hinging on global developments and energy prices.

Fiscal path and EUR/HUF range

"Yesterday, Hungary unveiled a full fiscal path plan, under which the deficit is projected to decline from 4.9% next year to 2.8% by 2030. According to the prime minister, Hungary aims to adopt the euro as soon as possible. The National Bank of Hungary kept interest rates unchanged at 5.50% yesterday and reiterated previous statements regarding euro adoption, noting that the fiscal path aligns with the euro adoption plan."

"At the same time, the governor pointed out that rising core yields, uncertainty, and inflationary risks necessitate a cautious monetary policy."

"In our view, this accurately captures the current situation: while the domestic narrative is evolving positively – to the market's satisfaction – the global environment remains unfavourable. Our economists see a possibility of a rate cut toward the end of the year, provided that the global situation, particularly energy prices, stabilises."

"Following the release of the budget plan for next year on Monday, the market is undergoing a correction after a rally in previous weeks. As we have discussed, long positions on Hungary had become overly crowded; the "buy the rumour, sell the fact" scenario has fully played out, and we are likely to see further profit-taking."

"Over the past two weeks, EUR/HUF has remained within a tight range of 362-364, and its next direction will likely depend more on global developments. Yesterday’s signs of a potential easing of tensions between the US and Iran could provide a positive boost, helping the pair move toward the lower end of its current range."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)