After the NBH meeting, everything seems to be in line with market expectations and rates have not changed much. This is good news for HUF, which has reestablished its relationship with rates over the past three days and weakened to 380 EUR/HUF ahead of the meeting. Still, the recent rate hike points to weaker HUF levels, but that probably won’t be the case for now. A stable NBH and higher EUR/USD could offset this, plus we could see some progress in negotiations with the EU in the near term. Overall, today’s meeting looks positive for the HUF, which will stop the weakening of recent days. In the short term we probably need to see some catalysts for further gains, for example the EU story, but overall we remain positive on HUF. If everything goes in a positive direction, then we believe EUR/HUF will move to the 370-375 range before the end of the year. On the other hand, the current weakness probably hasn’t changed the market’s long positioning much and we should still take it into account if bad news arrives.
Rates have risen sharply in recent weeks, closing the largest gaps between market prices and our forecast. But there is still something missing to reach perfection and we still see the entire curve lower, but rather flatter afterwards. At the short end of the curve, we believe the market needs to adapt to the set pace of 75 basis point rate cuts, as confirmed by the central bank today, while the long end remains significantly elevated also due to high base rates. Therefore, as we mentioned earlier, in our view, the long end has more potential to continue rallying and the curve has steepened too early and too quickly, closing the gap with the region.