Hungarian Forint: NBH easing path shapes HUF prospects – ING

ING strategist Frantisek Taborsky reports the National Bank of Hungary (MNB) cut rates to 5.75% and confirmed dovish guidance, signaling further easing in August and possibly beyond. Markets have accepted renewed rate-cut pricing, and ING expects more dovish repricing. For FX, EUR/HUF is seen capped near post-election levels, with a move back below 360 if the global backdrop stabilizes.

Dovish NBH cuts and HUF outlook

"The National Bank of Hungary, as expected, cut rates by 25bp to 5.75% and confirmed its dovish forward guidance. It committed to another rate cut in August and an assessment of the situation in September, possibly continuing the cutting cycle from there."

"The NBH’s confirmation of its earlier forward guidance, despite elevated volatility and pressure on Hungarian assets amid the global risk-off sentiment, should reassure markets that the local story is unchanged. The reaction after the press conference suggests investors have accepted the dovish signal, with rate cuts returning to market pricing. "

"We expect this to continue, supported by an unchanged fundamental backdrop after the April elections and repeated downside inflation surprises. With markets having priced out around 40bp of easing and the implied terminal rate back near 4.75-5.00%, we expect pricing to shift toward a more dovish view after yesterday's meeting, closer to our medium-term forecast of 4.00%, while curve steepening continues."

"The FX implications are more mixed. Further NBH rate cuts would weaken expected carry, while a stronger US dollar and risk-off conditions remain unfavourable for EM currencies. Still, EUR/HUF has almost returned to post-election levels, which should limit further upside. If the global backdrop stabilises, we expect EUR/HUF to move back below 360."