Hungarian central bank to tighten policy in longer-term, EUR/HUF to trade at 310 in quarters ahead – Lloyds Bank

The EUR/HUF pair has been caught in the crosswinds of global emerging market sentiment; however, to a lesser extent that some other currencies in the last month, noted Lloyds Bank in a research report. The currency pair rose sharply to a high of 314.29, but it came back towards 311. The Hungarian forint is expected to look better insulated that most from external developments in the future.

This is mainly due to Hungary’s solid current account position and recent upgrade to investment-grade credit. Hungarian monetary policy is loose, but the euro area continues to be ultra-accommodative after the extension of the ECB QE program. In the longer-term, the Hungarian central bank is expected to tighten policy ahead of the European Central Bank, stated Lloyds Bank.

In the meantime, political risks between Hungary and the remainder of the EU appear to be relatively symmetric in the year ahead. This implies that the EUR/HUF pair would trade closer to 310 in the quarters ahead, added Lloyds Bank.