GBP/HUF Outlook:
The GBP/HUF exchange rate shows a slightly weaker outlook, trading below its recent average and near recent lows. The recent stability in the exchange rate has left little momentum for significant movement.
Key drivers:
• Rate gap: The Bank of England is maintaining steady rates due to inflation concerns, while the National Bank of Hungary keeps its rates higher to stabilize the forint, creating a divergence that pressures GBP against HUF.
• Risk/commodities: Oil prices remain below average, affecting broader market risk and putting pressure on currencies including the GBP as investors seek safer assets.
• One macro factor: The outlook for inflation in Hungary is positive, with projections indicating it may fall below the target, influencing confidence in the forint.
Range:
Expect the GBP/HUF to drift within its recent range given the current positioning, supported by underlying stability.
What could change it:
• Upside risk: A significant improvement in UK economic data or retail activity could bolster the GBP.
• Downside risk: Further geopolitical tensions could lead to increased risk aversion, negatively impacting GBP demand.