Less Dovish NBH Policy Mix Offers HUF Little Reprieve

While the NBH will very likely slow the pace of rate cuts as it fends off concerns of government meddling, the local currency has failed to make a meaningful recovery off its cycle lows even as markets price in a less dovish NBH.

• Hungary’s FRAs have come off multi-month lows in March, though EURHUF trend conditions remain strongly bullish with the earlier breach back below the 20-day EMA proving to be short-lived. Topside focus therefore continues to lie on the 400.00 handle.
• Given the central bank’s well-touted attentiveness to adverse HUF developments, officials will be concerned by the downward trajectory of the HUF even as prospects of a less dovish policy mix are priced in by markets. Indeed, a former NBH governor told MNI that the NBH may need to cut by as little as 50bps at next week’s MPC meeting.
• On an intraday basis, CE3 FX has exhibited moderate weakness ahead of the Fed where the implications of a shift to fewer Fed rate cuts in 2024 could hamper the EM FX basket. At typing, EURHUF is around 0.3% in the green and near yesterday’s highs around the 396.00 handle.