EUR/HUF Outlook:
Bearish, as the rate is below its recent average and near recent lows.
Key drivers:
• Rate gap: The European Central Bank (ECB) is maintaining lower interest rates compared to the National Bank of Hungary, which keeps rates higher at 6.5% to address inflation.
• Risk/commodities: Rising oil prices are creating inflation concerns globally, impacting the euro's strength against the forint.
• Macro factor: Hungary's economic outlook has been downgraded, raising worries over its ability to maintain currency stability.
Range:
Expect EUR/HUF to test the lower extremes of its recent trading range as macroeconomic pressures weigh on the currency.
What could change it:
• An increase in Eurozone economic data or a shift in ECB policy could strengthen the euro.
• A worsening of Hungary's fiscal position or external economic risks may further weaken the forint.