EURHUF Returns to Flat Ahead of NBH Meeting

EURHUF has returned to flat, having briefly tested yesterday’s high at 390.47 before paring gains. Performance of the local currency is in-line with that of its regional peers today, though it had underperformed yesterday following an FT report on an internal EU memo suggesting that EU leaders should threaten withholding funds to Budapest. Market pricing of a more dovish policy mix has weighed on the forint since Deputy Governor Virag hinted in mid-January that the pace of monetary easing would accelerate. Since Jan 18, EURHUF has rallied over 3%, while PLNHUF has reached its highest level since December 2022.

• For EURHUF, a clear break of 390.16, a retracement level, would open 394.65, the Sep 28 high. However, ING say they don't see much room for further HUF weakness compared to previous days. They note that “The weakening after today's decision may be a signal for the market to start buying the forint above 390 EUR/HUF again after rates adjust to the new central bank trajectory.”
• The NBH rate decision will be announced at 13:00GMT/14:00CET followed by the policy statement and briefing by Deputy Governor Barnabas Virag at 14:00GMT/15:00CET. See the full MNI Preview, with a summary of sell-side analyst views, here.