Hungarian Forint: MPC minutes key for support against Euro – Commerzbank

Commerzbank’s Tatha Ghose explains that the Hungarian Forint (HUF) has recently given back gains as external shocks and an ongoing Magyar Nemzeti Bank (MNB) easing cycle erode support. With the currency back above 360 versus Euro (EUR), markets await Monetary Policy Committee (MPC) minutes for signs of a more conditional stance on rate cuts that could limit further Forint downside and reinforce foreign exchange stability.

Forint relies on conditional MNB easing

"That trend has become less convincing over the past month, however, with the forint surrendering a meaningful share of its earlier gains to return to its erstwhile 360-plus range versus the euro."

"The second factor is monetary policy. MNB had just kicked off a monetary easing cycle and, following its July meeting, indicated that it sees room for additional rate cuts during the summer before reassessing the outlook in September – this guidance sounds like a relatively unconditional commitment to further easing even though the balance of inflation risks has just swung. That has inevitably reduced some of the forint’s interest rate support."

"A more conditional tone would help reassure markets that MNB may soon ditch the rate cutting cycle, which would limit further downside pressure on the forint. In the end, MNB’s long-standing emphasis has also been about maintaining foreign exchange stability."

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