Hungarian Forint: Mixed HUF Outlook After NBH Pause – ING

The National Bank of Hungary (NBH) paused rate cuts as expected and lowered its inflation target to 2.5%, providing some support for the forint exchange rate. ING strategist Frantisek Taborsky noted that this policy backdrop is positive for the forint, with the yield curve potentially flattening further and the euro-forint (EUR/HUF) exchange rate having the potential to retest the 360 level. However, he stressed that global dollar strength, energy price volatility, and potential Federal Reserve rate hikes could easily dominate the forint's FX outlook.

**Policy Support Coexists with External Headwinds**

The Hungarian central bank's latest decision has created a relatively favorable environment for local assets. ING's previous reports mentioned that Hungary's long-term narrative of joining the eurozone, along with expectations that the inflation target could move closer to 2.00% in the future, provide broad support for Hungarian assets. However, Taborsky believes these domestic positives are currently facing severe external challenges. The core drivers of global markets—a strong dollar and hawkish stances from major central banks—exert broad pressure on emerging market currencies, and the forint cannot escape this trend.

**Technical and Valuation Outlook**

From a technical perspective, the ING strategist mentioned the possibility of EUR/HUF retesting the 360 level. According to market reports, the forint appreciated significantly after Hungary's election, touching the 350 level, but has since given back some of those gains. At the time of writing, EUR/HUF was trading around 362.91, above the previously tested 360 level, indicating external pressures are taking effect. ING's previous year-end forecast for EUR/HUF was 350, but current exchange rate levels suggest that achieving this target would require a reversal in dollar strength or an unexpectedly positive domestic catalyst.

**Divergent Views and Risk Warnings**

Notably, there are subtle differences among ING's internal analysts. Some argue that the deteriorating outlook for forint FX carry trades may ultimately stabilize EUR/HUF rather than drive it significantly higher, and expect the exchange rate to move toward the 355 area in the short term due to dollar strength and central bank rate cuts, with some resistance at that level. Overall, while the Hungarian central bank's policy stance provides a supportive backdrop, the forint's short-term fate remains highly dependent on global risk sentiment and dollar movements.