The EUR/HUF currency pair has rallied from a 15-month low below 303 in August to more than 312, noted Lloyds Bank in a research report. Political risk continues to be high after the European Parliament announced that it would vote in September 2018 on whether there is a ‘clear risk of a serious breach of EU values’ in Hungary.
This might have major repercussions for the nation’s voting rights. Hungary greatly relies on EU funding and an additional escalation in tension risks harming its economy. For now, the Hungarian forint appears well anchored due to the nation’s solid current account position and investment grade credit rating. The EUR/HUF pair is expected to consolidate around recent levels. Unconventional policy easing by the Hungarian central bank has been unsuccessful in considerably deterring forint buyers and the central bank appears to be in no hurry to hike interest rates in spite of the headline inflation hovering near target.
“At current levels, the risks to our forecasts are fairly balanced. We forecast EUR/HUF at 307 at end 2018”, added Lloyds Bank.
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