USD/HUF Outlook:
The USD/HUF exchange rate is likely to decrease as it currently trades below its 90-day average and is near recent lows. This weakness is compounded by broader economic concerns affecting the HUF.
Key drivers:
• Rate gap: The Federal Reserve's recent interest rate hikes bolster the USD, whereas the Magyar Nemzeti Bank maintains high rates to curb inflation.
• Risk/commodities: Oil prices have been declining, which may weaken commodity-linked currencies, impacting the HUF negatively.
• One macro factor: Hungary's rising fiscal deficit poses risks to investor confidence, contributing to HUF volatility.
Range:
Expect the USD/HUF to drift within its recent 3-month range, with a potential test of the lower end.
What could change it:
• Upside risk: A stronger-than-expected US manufacturing PMI could lead to further USD gains.
• Downside risk: A significant improvement in Hungary's inflation levels might support the HUF and weaken the USD/HUF rate.