HUF: NBH rate cut confirms dovish market pricing – ING
The National Bank of Hungary delivered a 25bp rate cut to 6.75% yesterday, bringing it closer to its CEE peers again, ING’s FX strategist Frantisek Taborsky notes.
NBH rate cut encourages FX to weaken
“While NBH communication hasn't changed much, we saw openness to rate cuts for the next meetings. However, it is clear that the inflation rebound rate in the coming months and EUR/HUF will be crucial. On the inflation side, our economists still expect rather more than the current consensus with 5.3% at the end of the year. For now, we leave one additional rate cut for this year in our forecast.”
“The HUF therefore has a heavy burden to bear in our view. We have been bearish here for some time, and this is mainly due to the rally in the rates market in the last three weeks and the significant tightening of the rate differential that we discussed here earlier. Yesterday's rate cut is just a confirmation for markets of the current market pricing and will be a trigger for HUF to weaken.”
“Although summer low liquidity may bring surprises, we believe EUR/HUF will go up in the coming days, with 394 as the first stop. In the medium term, we maintain a trading range of 385-400 EUR/HUF, which makes sense for us to keep going forward. However, in the short term, we now see a move towards the upper range due to the NBH's stance and market pricing.”
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