Hungarian Forint: Rate Path Extends Beyond Summer – ING

USD/HUF is currently trading near 310.39184, with markets focused on the Hungarian central bank's rate decision on Tuesday. ING strategists believe this will be the final step in the small easing cycle that began in the summer, but the direction of policy loosening is not over yet. Market participants suggest that the continuation of the policy rate path implies a gradual weakening of the forint's interest rate support in the near term.

Room for rate cuts remains, but the pace will slow. Although the benchmark rate has already been cut to 6.25%, ING strategists note that easing is expected to continue, albeit with a more cautious tone, emphasizing the need for prudence in the remainder of the year. This "slow but steady" expectation leaves the forint lacking direct momentum to test lower levels.

The policy mix is a key market focus. At the previous decision, the central bank confirmed the rate at 6.50% and maintained a hawkish tone, but market attention quickly shifted to its decision to cut the reserve requirement ratio. This suggests that beyond adjustments to the rate level, fine-tuning of other policy tools will also have knock-on effects on forint liquidity and valuation. Overall, the forint is at a stage of seeking new drivers, and while a potential rate cut next month is unlikely to trigger a sharp depreciation, a fresh catalyst is still needed to reverse the current mild downward pressure.