Morgan Stanley predicts euro could reach 410 forints amid worsening economic outlook
Morgan Stanley has forecasted a difficult period ahead for Hungary’s currency, suggesting the euro-to-forint exchange rate could rise as high as HUF 410.
Morgan Stanley advises to short the forint
According to Economx, the American financial institution pointed to increasing risks in Hungary’s economy and advised its clients to short the forint. According to their analysts, the target exchange rate is 410 forints to the euro, which they believe is within reach.
Their rationale for this projection is based on the growing concerns regarding both Hungary’s fiscal and monetary policies. While it’s unclear when this trading recommendation was communicated to clients, it’s worth noting that on Monday, the forint performed poorly, weakening from HUF 393 per euro in the morning to HUF 394.8 by the afternoon.
Reasons behind the forint’s weakening
Several factors are contributing to the forint’s weakening, including the anticipation of a 25-basis-point interest rate cut by the National Bank of Hungary, expected on Tuesday. The analysts provided few details in their recommendation, merely citing Hungary’s deteriorating macroeconomic environment.
Morgan Stanley isn’t the only bank voicing concerns over the forint—Barclays and Citigroup have issued similarly bleak outlooks for the currency recently, Economx writes. In the short term, Morgan Stanley sees little chance of the European Union releasing Hungary’s frozen funds, and they also flagged uncertainties surrounding the next elections. However, these points aren’t particularly convincing or new, adding little to the overall analysis.
Public spending increase before the 2026 elections?
The report also highlighted that the forint has been under pressure since early September, following rumours that the Hungarian government plans to relax its fiscal discipline in the 18 months leading up to the 2026 parliamentary elections by increasing public spending. Finance Minister Mihály Varga, however, has dismissed these claims as unfounded: as Economx writes in another article, according to a U.S. financial news agency, the Hungarian government is planning substantial cash handouts next year, which Varga has labelled as “fake news.”
In preparation for the 2026 elections, the government is expected to prioritise spending over fiscal consolidation, Bloomberg reported. However, the administration may hold off on any major decisions until after the U.S. presidential election in November, as well as the year-end credit rating review, where Hungary currently sits at the lowest investment-grade level.
The report suggested that the pre-election spending plans could resemble the strategy from 2022. Back then, tax rebates to families with children significantly fueled inflation, leading to one of the highest inflation rates in the European Union, triggering a recession and contributing to the ongoing cost-of-living crisis in Hungary. According to Index, Prime Minister Viktor Orbán supports the spending approach, believing it will secure another electoral victory, just as it did in 2022.
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