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Selling Pressure on HUF Surges Following Orban Elections

HUNGARY
  • Hungarian Prime Minister Viktor Orban will hold an international press conference today (2pm CET) after winning a fourth consecutive term in Sunday’s general election (BBG).
  • We have seen that the selling pressure on HUF has been rising this week following Orban’s victory over the weekend as market has been pricing in renewed political tensions with the EU in the near to medium term.
  • EU Von Der Leyen confirmed yesterday that the Commission has triggered the rule of law conditionality mechanism against Hungarian government.
  • The political divergence between Hungary and the EU has been delaying the EU pandemic funds; as a reminder, Hungary is due to receive 7.2bn EUR in grants under EU’s recovery funds, which is worth around 5% of the country’s GDP.
  • Hence, even though the HUF is currently trading significantly below its ‘fundamental’ value, political uncertainty may weigh on the forint in the short term.
  • EURHUF is currently trading above 377, up 10 figures this week, increasing the pressure on NBH policymakers as a weakening forint keeps supporting inflation expectations.

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