What does the future hold for the forint? 300/EUR or 400/EUR zone?

Although this can be said almost every week, the week behind us has also seen a lot of turbulence in the forint exchange rate market. The Hungarian currency has seen both a sudden rise and a sudden fall. In the end, it managed to close the week below 387/EUR, but it will be interesting to follow the forint exchange rate in the upcoming weeks.

EU funds are coming

As we have reported HERE, Hungary could receive a significant part of the EU funds it is entitled to by the end of November. The country might not receive the EUR 13 billion that have been frozen, but EUR 10.7 billion. Tőzsdefórum writes that later, the President of the European Commission called the news speculation and several relatively contradictory reports were published. Whatever the truth is at this stage of the negotiations for the money, it is clear that, in line with what analysts have said in the past, the issue of EU funds remains very relevant for the domestic currency. It was also important information that the government is raising the budget deficit target for this year to 5.2%.

A ray of hope

According to some experts, the news of receiving the EU funds could have had a positive effect on the forint exchange rate. However, it did not really happen. As we have reported HERE, the forint started weakening even after the great news. The situation got so out of hand that the Hungarian currency reached the 390/EUR zone again. This is extremely unfortunate considering the fact that the forint showed a huge strengthening in the first half of the fiscal year.

Tőzsdefórum also writes that it is not only country-specific factors that can be important: developments in international market sentiment can also have an impact on the forint exchange rate. Especially if they are shaped by the monetary policies of the major central banks. This is certainly the case now, and the investor climate in Europe and overseas has become quite volatile accordingly.

What is next?

We should also take into consideration what is perhaps the most important issue for the forint, the monetary policy of the Hungarian National Bank. Analysts at ING expect the central bank to cut interest rates by only 25 basis points in October, as a sign of caution. The interest rate paid on the forint could therefore remain well above regional levels. The high interest rate level could support the forint, so ING expects a 375/EUR exchange rate by the end of this year. By mid-2024, the forint exchange rate could sink to 365/EUR, and by the end of the year, ING experts expect 370/EUR. You can read more about the forint’s roller coaster HERE.