The EUR/HUF exchange rate has seen significant developments influenced by both the euro and the Hungarian forint's dynamics over the past two months. Recently, the euro has been buoyed by the weakness of the US dollar, which has allowed it to maintain strength despite a downward revision in the Eurozone manufacturing PMI. Analysts have highlighted that the outcome of the Eurozone's consumer price index report could further boost the euro if it indicates a sustained rise in inflation, reinforcing the notion that the European Central Bank (ECB) will pause its rate cutting cycle.
In terms of monetary policy, the ECB's recent dovish stance—reflecting a shift from its previous tightening measures—has raised expectations for future interest rate cuts, with predictions of a decline to 3.5% by late 2025. This could diminish the interest rate differential between the euro and the US dollar, potentially impacting the EUR's performance against the forint. However, key developments such as Bulgaria's upcoming accession to the eurozone and a significant appreciation of the euro against the dollar earlier this year—by nearly 14%—demonstrate a resilient euro at present.
On the HUF side, the National Bank of Hungary (NBH) has maintained its base interest rate at 6.5%, the highest in the EU, to combat persistent inflation which remains above target levels. This high interest rate has contributed to a surge in the forint's value, pushing it to an 18-month high against the euro at approximately 385 HUF to 1 EUR. Market sentiment around Hungary's economy appears optimistic; however, there are concerns regarding the government's reluctance to adopt the euro, which may hinder long-term stability and growth.
The EUR/HUF pair currently trades at 90-day lows around 380.8, significantly below its 3-month average of 388.1 and has fluctuated within a 3.4% range. This recent stability contrasts with the volatile price movements seen in the oil market, where oil prices have dipped approximately 3.6% below their 3-month average, reflecting broader economic pressures that can indirectly impact both currencies.
Overall, the interplay between the ECB's policies, Hungary's high interest rates, and geopolitical concerns are central to the evolving EUR/HUF exchange rate. Analysts will continue to monitor both economic indicators and central bank communications to navigate future trends in this currency pair.
