EUR/HUF to head higher towards 355 as NBH hawkishness is priced in – ING

The National Bank of Hungary meets on Tuesday, August 24 to set interest rates and a third consecutive 30 basis point hike in the base rate is widely expected. The Hungarian forint has been performing very well but as a front-loaded tightening cycle is already priced in, EUR/HUF is set to rise to the 355 area, as per ING.

Markets pricing in tightening

“All points to a 30bp hike in the base rate to 1.50% and probably language signalling further increases. We favour the base rate being brought close to the 2.00% area by year-end.”

“Given that a lot of the good news looks priced into the HUF, and fragile EMFX in general, we would say the balance of risks in EUR/HUF lie towards the 353, possibly 355 area.”

“One wild card at the meeting is what the NBH does with its QE policy. Any hints that it could start a gradual taper could hit the pricing of the terminal base rate and could upset a market going into the meeting long the forint.”