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FX BANK FORECAST · COVERAGE
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Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 30 institutional desks. No promotion.
FX BANK FORECAST · COVERAGE
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 30 institutional desks. No promotion.
The desk maintains a bullish view on the Hungarian forint (HUF) following the National Bank of Hungary's (NBH) anticipated continuation of its 'mini rate cut cycle', with a forecasted base rate reduction to 5.75% on July 21. Per the full note source, recent positive signals include lower-than-expected inflation and a steady influx of EU funding, which could sustain a favorable risk premium for HUF assets. Consensus seems aligned on the July action while the potential for further rate cuts later in the year remains high, should the external environment remain stable. The current EUR/HUF range of 350-360 suggests a cautiously optimistic market, despite looming international tensions that could disrupt this outlook.
The desk expects the NBH to proceed with a 25bps rate cut on July 21, reducing the base rate to 5.75% as part of a broader easing cycle. This aligns with ongoing trends of stabilizing inflation and available EU funding contributing to a generally positive outlook for Hungary.source
With the central bank's previous commitment and the supportive external environment, we could see further cuts beyond July, potentially driving the terminal rate to between 4.75% and 5.00%. As such, the incorporated risk premium around the HUF should remain benign if these conditions hold.
Currently, the consensus target for EUR/HUF stands at 1.075, reflecting the market's expectations for the Hungarian economy’s performance and potential euro adoption plans:
The desk's forecast for a sustained easing cycle aligns with jpmorgan’s more bullish stance but sits slightly lower than bofa’s more cautious target.
Most firms like jpmorgan are optimistic on the potential for further easing from the NBH given the recent economic data. Conversely, bofa remains cautious, indicating a divergent view that reflects varying assessments of the risk landscape in Hungary.
Related currency pairs that may reflect similar dynamics include EUR/USD, which aligns with expectations of the ECB's rate path, and HUF/CHF, providing insights into regional risk factors influencing the Hungarian currency.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
Market implications
Watch for EUR/HUF to maintain levels between 350-360 as the market anticipates the upcoming rate decision. A successful rate cut could build momentum for further easing and attract more inflows, potentially strengthening the HUF.
Risks to this view
Heightened geopolitical tensions, especially from the Middle East, could derail expectations for further rate cuts and lead to increased volatility in HUF. Additionally, any setbacks regarding EU funding or local political commitments may also undermine the current bullish narrative.
Articles National Bank of Hungary preview: Next, please! Published 10:21 Hungary Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The next step of Hungary’s “mini rate cut cycle” is around the corner. Recent market turmoil hasn’t derailed the positive risk premium story overall, and the latest inflation figure was lower than the central bank projected.
Markets, forever fixated on whatever comes next, seem to be channelling Philip Larkin's Next, Please Peter Virovacz and Frantisek Taborsky NBH Governor Mihaly Varga’s latest comments have made it clear that the next road crossing is in September Our call This time, there's no need to outsmart or overthink anything or anyone. Governor Mihaly Varga announced the 'mini rate cut cycle' for the summer in June, and nothing we have seen so far has thrown the plan off course. Against this backdrop, we anticipate a 25bp reduction in the base rate, bringing it down to 5.75% on 21 July.
Looking ahead, if the external environment remains supportive and local politics deliver on previous commitments regarding the euro adoption plan, EU funding developments, and long-term fiscal adjustments, the risk premium for Hungarian assets could remain persistently low. In this case, we forecast a 'midi' rate cut cycle involving three or four further rate cuts following July's move. The biggest issue now is that the recent flare-up in the Middle East has increased the risk of miscalculation.
At a local level, everything is going according to plan, with €16.4bn in EU funds being made available to Hungary. Therefore, while it is still difficult to be certain, our terminal rate for this year is 4.75-5.00%. Our market views EUR/HUF rebounded from the June low near 350 and has since settled into a 350-360 range.
Implied volatility has fallen but remains above CEE peers. Since the April general election, EUR/HUF has traded in a largely self-contained environment, with global factors having less influence than elsewhere in the region. Even with the NBH signalling a rate-cut cycle and interest rate differentials tightening meaningfully, the currency has shown limited sensitivity.
Looking ahead, we expect EUR/HUF to remain stable, with the second half of 2026 likely dominated by range trading within 350–360 and a further decline in volatility. While markets may price additional rate cuts from current levels, rates appear to have a limited impact on FX for now. Recent Middle East-related headlines and weaker global sentiment have done little damage to the forint, with any softness quickly absorbed by the market.
Despite NBH rate cuts, FX carry remains attractive within emerging markets, and the positive local story could draw further carry demand over the summer, particularly if volatility keeps falling. CEE FX performance vs EUR (end-2025 = 100%) Source: NBH, ING "> Source: NBH, ING Since the general election, almost every inflation print and NBH meeting has given rates and bonds a reason to rally. After June inflation came in below the NBH forecast, market pricing has stabilised around a 4.50% terminal rate over the two-year horizon.
Compared with our forecast and the market’s 2024 lows, we still see room for a further rally. In early 2024, markets priced a 4.25% terminal rate despite a much less favourable backdrop for the central bank. We therefore expect the curve to move lower, with a continued steepening bias and further spread compression versus core and CEE markets.
Hungarian yield curve Source: GDMA, ING "> Source: GDMA, ING In bonds, the debt agency has seen strong demand for Hungarian government bonds since the start of the year, with momentum accelerating after the April general election. The uncertain fiscal outlook makes this year’s funding need difficult to estimate. But under the old plan based on a 5% ESA deficit, around 80% of issuance has already been covered, including switches and next year’s pre-funding.
After the latest euro-denominated deal, the debt agency also indicated that FX issuance is complete for this year. This leaves HGBs as the main funding tool, while the agency is likely to keep taking advantage of strong demand. That supports further curve steepening, although the long end should continue to benefit from euro adoption expectations and EU funds inflows.
Some background Inflation inched lower once again in June , despite the global price shock caused by geopolitical events. The strength of the forint appears to be more effective in stabilising prices than any other factor. We have revised our inflation trajectory downwards once again, which has led us to expect further monetary easing.
Compared to a month ago, we have added an additional rate cut to our base case scenario . The National Bank of Hungary’s latest Inflation Report projected that the inflation rate in June would be 2.0%. However, instead of accelerating to that level, it fell to 1.7% year-on-year.
In contrast, energy prices have increased compared to levels around the June rate-setting meeting, but volatility is too high to generate widespread fears of pausing the cycle. Admittedly, the recent weakening of the forint, with EUR/HUF hitting 360, would raise some eyebrows in isolation. However, zooming out over the past few months, the cross has been range-bound in the 350-365 area since mid-April.
In fact, the Hungarian forint is still 10% stronger year-on-year. Hungarian government bond yields have also inched higher recently, but the yield environment is still roughly 175-200bp lower than a year ago. According to a review conducted by the new government, the accrual budget deficit would have amounted to 8.3% of GDP had there been no change in government.
Due to the government's actions to date and the agreement with the EU, the projected deficit for this year (without additional measures) has been reduced to 7.5% of GDP. The government will amend the 2026 budget and set a new deficit target by the end of August, so the 7.5% figure is merely a starting point for planning. In this regard, however, this update does not bring enough change to the table for the central bank to reconsider the forces shaping the future path of inflation.
NBH Preview NBH National Bank of Hungary Monetary policy Interest rates Hungary Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Peter Virovacz Senior Economist, Hungary Peter Virovacz is a Senior Economist in Hungary, joining ING in 2016.
Prior to that, he has worked at Szazadveg Economic Research Institute and the Fiscal Council of Hungary. Peter studied at the… Frantisek Taborsky EMEA FX & FI Strategist Frantisek is an FX & FI Strategist covering EMEA markets, having joined the bank in 2022. He provides short- and medium-term recommendations for ING's corporate and institutional client… In this article Our call Our market views Some background
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