Bias: bearish-to-range-bound, as the HUF/USD is currently below the 90-day average and in the lower half of the 3-month range.
Key drivers:
• Rate gap: The National Bank of Hungary’s base rate remains higher than that of the Federal Reserve, supporting the HUF, but persistent inflation may prevent immediate interest rate cuts in Hungary.
• Risk/commodities: Oil prices have remained relatively stable, limiting volatility in the HUF, as Hungary's economy is sensitive to energy costs.
• One macro factor: The recent increase in core inflation in Hungary could lead to delayed easing of monetary policy, putting additional pressure on the HUF.
Range: The HUF/USD pair is likely to drift within its recent range, with limited potential for breaking out of the current trend.
What could change it:
• Upside risk: A stronger-than-expected US labor market report could push the USD lower, benefiting the HUF.
• Downside risk: Any aggressive signaling from the Federal Reserve regarding rate cuts could strengthen the USD against the HUF.