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Political Risk Premium Keeps Weighing on HUF

HUNGARY
  • Implied volatility on HUF has been surging on Monday as political divergence with the EU leaves forint vulnerable in the near term.
  • PM Orban mentioned earlier that Europe has been ‘abusing its power' against Hungary but is still in the country’s interest to stay as a member of the EU.
  • Orban added that Hungary will not agree to supply weapons to Ukraine.
  • EURHUF reached a high of 393.10 earlier before consolidating below 390 and is up nearly 10 figures in the past week.
  • The current HUF weakness combined with the elevated inflationary pressures will likely push the NBH to act via the 1W depo facility this week after maintaining its effective policy rate steady at 6.45% last Thursday.

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