HUF: National Bank of Hungary Holds Steady on Rate Cuts, EUR/HUF Slightly Higher

HUF: Sticking to the script

Yesterday's meeting of the National Bank of Hungary did not bring much news. The bank board reassured the markets again that it is in no way planning to increase the pace of rate cuts from the current 100bp per month and that is our view until September when central bank rates should converge to 13%. The first change to the base rate then comes in November, which will start off the series of 100bp cuts according to our forecast. From a market perspective, yesterday's meeting didn't bring much new to our market view.

EUR/HUF was slightly higher intraday after yesterday's press conference, but so far we see that as more of a global story. The US dollar index and gas prices moved slightly higher again yesterday, both negative for HUF. However, in both cases, we see this as a short-term issue and still expect a stronger HUF supported by stable policy direction, high carry and weaker US dollar in the medium-term.