Key Moments
- The Hungarian forint has been identified as the weakest Central and Eastern European currency in July, with EUR/HUF climbing back above 363.
- Société Générale notes a total return of -1.8% for HUF versus EUR this month, coinciding with expectations for another 25bp rate cut by the MNB to 5.75%.
- Diverging monetary policy paths in Hungary, Czechia, and Poland, alongside higher energy prices, are seen as undermining the forint’s carry appeal.
Forint Performance and Market Positioning
Société Générale highlights the Hungarian forint as the principal underperformer among Central and Eastern European currencies in July. The EUR/HUF exchange rate has moved back above 363 as markets position for an additional 25bp rate reduction by the central bank of Hungary, Magyar Nemzeti Bank (MNB), to 5.75%.
According to the bank, the forint has lagged broader regional peers within CEEMEA, both in price action and total return metrics against the euro.
| Metric | Detail |
|---|---|
| Identified laggard | Hungarian forint (HUF) |
| Reference pair | EUR/HUF above 363 |
| Anticipated MNB move | 25bp cut to 5.75% |
| Total return vs EUR this month | -1.8% |
Strategist Commentary on Recent Weakness
“The HUF has been the main laggard in CEEMEA this month (total return -1.8% versus the EUR) and the return over 363/EUR on Friday could be the portent of further selling as the MNB prepares to drop interest rates this week for a second consecutive meeting.”
The analysis underscores that the recent move in EUR/HUF back above the 363 handle may signal additional downside for the forint as investors respond to the MNB’s policy trajectory.
Monetary Policy Divergence and Carry Dynamics
“Higher energy prices have not helped the case of the forint but it’s really the divergence in monetary policy that caused the forint to fall behind.”
Société Générale points to the contrasting rate outlooks within the region as a key driver of underperformance. While Hungary is moving toward further easing, expectations for rates in neighboring markets are materially different.
“Compared to the lower rates in Hungary, money markets are discounting a higher/stable path for Czech and Poland over the next six months.”
This divergence is seen as diminishing the relative yield advantage historically associated with the forint, weakening its attractiveness to carry-seeking investors.
Outlook Ahead of the MNB Decision
“A 25bp cut by the MNB to 5.75% is widely anticipated tomorrow and erodes the carry appeal of the currency.”
With another reduction in policy rates expected at the upcoming meeting, the commentary suggests that the forint may remain under pressure as the market continues to reassess its carry profile relative to Czechia and Poland, against a backdrop of elevated energy costs.
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