EUR/HUF: Forint strength unlikely to last – Commerzbank

The Hungarian forint reached record lows on 13 October. The HUF has since rebounded c.5%, though it remains down 22% year-to-date. Economists at Commerzbank remain sceptical about the HUF strength.

EUR/HUF levels seem to suggest that the MNB’s strategy was working

“We remain sceptical as far as the strength of the forint is concerned and see it more as a reflection of improved market sentiment. The central bank (MNB) has committed to a mixture of different tools, above all aimed at financial stability and the support of the currency, which in the end make monetary policy measures less transparent. They are less suited for the fight against inflation.”

“It might be dangerous for the MNB to hope that inflation rates might ease soon, thus reducing the pressure to take action regarding the key rate (and thus the downside pressure on the forint).”

“For the time being, EUR/HUF levels seem to suggest that the MNB’s strategy was working. It remains to be seen how long the market will swallow that. The first test will be the key rate decision on Tuesday, and more importantly the publication of the October inflation data in early November.”