Research Detail
| 2024/11/06 / Erste Group Research |
CEE Special Report | Will Hungarian forint remain weak? Global factors have increased volatility on the FX market lately. The US elections as well as expectations on monetary policy decisions on the core markets are in focus, impacting the FX and bond markets in the region to a great extent. Donald Trump is projected to become the next US president. In response to the news, CEE currencies depreciated against the euro on Wednesday morning. The EURHUF touched 412 briefly, the EURPLN moved up to 4.37, while the EURCZK is holding close to 25.3.The extent to which President Trump realizes his election promises will influence the economic and market development in Central and Eastern Europe. In this report, however, we zoom in on the Hungarian forint, which remains the most vulnerable currency to the external development. Depreciation of the Hungarian forint has been long-lasting. Over the last decade, the Hungarian forint has lost 30% against the euro. The weak economic performance in recent quarters, high likelihood of no fiscal consolidation before 2026 parliamentary elections and limited access to EU funds support higher EURHUF levels. We try to capture the share of variation coming from regional co-movements across currencies as well as impact of country-specific factors (monetary and fiscal policy as well as political situation). We find out that country-specific factors add to weakening pressure in Hungary, as opposed to Czechia and Poland. The weak Hungarian forint will tie the hands of the central bank, which otherwise could proceed with monetary easing (which could help to stimulate economic growth as well). Fundamentally, the surpluses on the trade and current account balances support the forint, but perhaps not enough to change the trend. The overall vulnerability demands maintaining the positive interest rate differential. All in all, we see the Hungarian forint in the range of 400-410 against the EUR in the nearest future. However, slow depreciation should continue in the medium term. Strong sensitivity to risk appetite is likely to remain a key feature. |
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General information
| Author | Erste Group Research |
| Date | 2024/11/06 |
| Language |  |
| Product name | CEE Economies Special Report |
| Topic in focus | FX, Macro/ Fixed income |
| Economy in focus | CEE, Czech Republic, Hungary, Poland |
| Currency in focus | Czech Koruna, Hungarian Forint, Polish Zloty |
| Sector in focus | - |
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