EUR/HUF likely to trade at weaker range by end-2019

The Hungarian forint exchange rate has been brought to a softening path by the increased global uncertainties stemming from the intensified trade conflicts, unresolved Brexit and negative global growth outlook, noted Erste Group Research in a report.

Moreover, the fairly accommodative stance of the central bank’s monetary policy does not underpin the forint. Owing to changed global rate outlook and lower inflation risks, the slow normalization of monetary policy began in March has already come to a halt and no tightening step is expected in the coming period.

Unconventional monetary policy tools might stay crucial, as the central bank might continue to try to maintain low volatility of rates on the interbank market. Therefore, direct management of liquidity on the market, mainly via FX-swap tenders is to play crucial role in exchange rate movements.

“Despite the favorable external balance position of the economy, given the bulk of global uncertainties and loose monetary policy of the MNB, the EUR/HUF might move in a weaker range of 325-335”, added Erste Group Research.