EMEA FX Talking: Hungarian love affair continues
At a Glance
The desk views the current investor affinity for Hungarian assets as a pivotal moment driven by positive governmental rhetoric towards euro adoption—per the full note, increasing speculation supports the forint even amid anticipated policy rate cuts by the central bank. Additionally, the Czech koruna is expected to remain strong due to its central bank's hawkish stance, contrasting with lower expectations for the Polish zloty. As it stands, consensus targets for EUR/USD show a range between 1.1200 and 1.2000, indicating a bullish sentiment across firms. This dynamic sets the stage for potential volatility, particularly if external market factors arise, warranting close observation.
Key Takeaways
- 01Continued investor interest in Hungarian assets driven by proposed euro adoption.
- 02Strong economic indicators support forint despite expected central bank rate cuts.
- 03Czech koruna benefits from a hawkish central bank stance, while Polish zloty lags behind.
Full Analysis
What the desk is arguing
The investor sentiment toward Hungarian assets remains buoyant, primarily fueled by discussions regarding the potential adoption of the euro by the new government. This sentiment aligns with the expectation that while the Hungarian central bank will initiate policy rate cuts, the forint is poised to maintain its gains due to market optimism. Per the full note, the forint is expected to hold up even as the National Bank of Hungary prepares to cut the base rate, reflecting a broader trend of eurozone alignment.
Furthermore, despite anticipated rate cuts, favorable economic indicators out of Hungary, including an unexpectedly low inflation figure of 1.8% in May, reinforce this optimistic stance. The Czech koruna is also positioned to outperform, driven by a continued hawkish tone from its central bank; this contrasts sharply with expectations for the Polish zloty, which is expected to underperform due to stagnant policy rates.
Where it sits in our coverage
Our current consensus target for EUR/USD stands at 1.1700, with a range spanning from 1.1200 to 1.2000. Specific firm projections reflect this sentiment, including: - Deutsche Bank: Dec-26 target of 1.2500 - BofA: Dec-26 target of 1.2200 - Rabobank: Dec-26 target of 1.1400
This unequivocally positions the desk's outlook at the lower-mid range of the forecasted spread, anticipating favorable market conditions for the forint as geopolitical risks loom.
How other firms see it
Generally, firms are signaling a bullish stance towards forint despite the looming rate cuts. Aligned firms include HSBC, predicting a stable forint due to favorable economic indicators that could boost investor confidence. In contrast, firms like CIBC, which predict a more tempered trajectory for the forint, caution against broader economic turbulence.
Correlated pairs to watch include the EUR/PLN and potential spillover effects from the ongoing adjustments in the European Central Bank's rate path, which could significantly influence trading dynamics in the region.
Market Implications
Watch for potential resistance at 1.2000 for EUR/USD as geopolitical tensions could trigger volatility. Market confidence in the forint will hinge on the implementation and timing of rate cuts by the National Bank of Hungary planned for late June.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
UOB | Bearish | 1.1140 |
ABN AMRO | Bullish | 1.1500 |
Bank of America | Bullish | 1.1500 |
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