EMEA FX Talking: Hungarian love affair continues
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.
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.
How firms align with this view
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.
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.
Risks to this view
A rapid change in geopolitical dynamics or a more aggressive cut in rates than expected by the National Bank of Hungary could undermine forint resilience, compelling a reassessment of the current bullish view.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
UOB | Bearish | 1.1140 |
ABN AMRO | Bullish | 1.1500 |
Bank of America | Bullish | 1.1500 |
Articles EMEA FX Talking: Hungarian love affair continues 08:17 FX Talking Czech Republic Hungary Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Investors' love affair with Hungarian assets continues as the new government talks of euro adoption. Expect the forint to hold gains even though the central bank will be cutting the policy rate. Also staying bid, but on the back of a hawkish central bank, will be the Czech koruna.
The Polish zloty should lag, given our view of unchanged policy rates this year Rafal Benecki , Peter Virovacz , David Havrlant , Mateusz Sutowicz , Dmitry Dolgin and Chris Turner Strong forint and koruna outperform as the zloty trails EUR/PLN: Zloty remains stable Spot One month bias 1M 3M 6M 12M EUR/PLN 4.25 Mildly Bearish 4.23 4.24 4.22 4.25 EUR/PLN maintains its narrow range (4.23 – 4.26) despite the turmoil in the Gulf, US dollar strength and a less hawkish approach by the central bank governor in June. The zloty remains relatively resilient to these factors. July was perceived as a live Monetary Policy Council meeting (due to the new projections), but recent dovish MPC comments and a low May CPI support our no-hike view for 2026, while markets still price 75bp in hikes.
These expectations shield the zloty against risk-off waves. Our view on the zloty remains unchanged. We expect a limited rise in EUR/USD in the second half of 2026, sustainable GDP outperformance and expected inflows of EU funds to justify EUR/PLN hovering close to 4.24.
Risks are still linked to geopolitical factors and a dovish MPC. Source: Refinitiv, ING Forecasts "> Source: Refinitiv, ING Forecasts EUR/HUF: Positive factors to maintain the strength of the HUF Spot One month bias 1M 3M 6M 12M EUR/HUF 352.91 Mildly Bearish 350.00 360.00 355.00 360.00 We see the National Bank of Hungary cutting the base rate on 23 June. The extremely favourable May inflation print at 1.8% made us consider the possibility of a 50bp cut, though we still regard this as a remote option.
With almost 100bp of easing priced in until end-2026, the easing cycle won’t derail the forint’s superstar status. Positive factors such as full access to EU funds, upgrades to ratings outlooks and a convergence programme should keep EUR/HUF at around 355 despite the lower interest rate premium. As policymakers prefer lower rates to a stronger forint, we see reactive policies sustaining a 350-360 range in the long term.
Source: Refinitiv, ING Forecasts "> Source: Refinitiv, ING Forecasts EUR/CZK: Czech rate hike on its way Spot One month bias 1M 3M 6M 12M EUR/CZK 24.18 Neutral 24.20 24.15 24.10 24.00 The Czech National Bank will likely proceed with one hike at its June meeting, which has been signalled by ample hawkish talk. However, we expect a split vote with a close call between a hike and flat base rate. In any case, the koruna will further be supported by the positive interest rate differential against the euro in both nominal and real terms.
Sources & References
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