USD/HUF Outlook: Likely to decrease, reflecting the rate's position below its recent average and near recent lows, impacted by current risks.
Key drivers:
• Rate gap: The U.S. Federal Reserve is expected to cut rates, while the Hungarian National Bank maintains a higher base rate to tackle inflation, widening the rate gap in favor of HUF.
• Risk/commodities: Softening oil prices may ease some commodity pressures on both currencies, but their influence on economic activity and sentiment remains uncertain.
• One macro factor: Hungary's inflation remains concerning, with core inflation surpassing acceptable limits, which may delay potential rate cuts and weigh on the HUF.
Range: Movement is likely to test recent lows as the USD struggles to gain traction and faces downward pressure.
What could change it:
• Upside risk: A surprise increase in the U.S. core PCE price index could lead to a re-evaluation of Federal Reserve rate cut expectations, providing support for the USD.
• Downside risk: Continued deterioration in inflation or economic outlook for Hungary could further weaken the HUF, exacerbating the USD/HUF decline.
