Moody’s upgrades Hungary’s sovereign rating, EUR/HUF to trade around 319 by end-2016

As widely expected, Hungary was upgraded to the investment grade of Baa3 by Moody’s. The rating agency also gave a stable outlook during its scheduled review on Friday. There is unlikely to be any significant market reaction due to this move, noted Commerzbank in a research note. Moody’s was the first agency expected to upgrade Hungary’s rating in 2016 base on fundamental improvements; however, Fitch and S&P surprisingly upgraded in recent months.

Hungary’s sovereign rating had rallied through the past year even before the first upgrades and now trade at valuations in line with an additional notch upgrade; however, there is no likelihood of an additional upgrade. Therefore there is no room left for additional rally in bonds or in the forint, said Commerzbank.

“We see EUR-HUF heading towards 310.00 by the end of the year as MNB becomes more dovish”, added Commerzbank.