Hungarian Forint: MPC minutes key for support against Euro – Commerzbank

Commerzbank’s Tatha Ghose notes that the Hungarian Forint (HUF) has recently lost some of its gains due to external shocks and the ongoing easing cycle by the Magyar Nemzeti Bank (MNB), which are eroding the currency's support. With the forint now trading above 360 against the Euro (EUR), markets are now looking to Monetary Policy Committee (MPC) minutes for indications of a more cautious approach to rate cuts that could help stabilize foreign exchange rates and prevent further depreciation of the forint.

However, this scenario has become less plausible over the past month, as the forint has given back a significant portion of its earlier gains and retreated to its 360-plus range versus the euro.

Additionally, the monetary policy stance of the MNB has also played a role in reducing the forint's interest rate support. Following its July meeting, the MNB signaled that it sees potential for further rate cuts during the summer before reassessing the outlook in September. This suggests a relatively unconditional commitment to rate cuts, which has diminished the forint's interest rate advantage.

A more conditional tone from the MNB would reassure markets that the bank may soon abandon the rate-cutting cycle, thereby limiting further downside pressure on the forint. Ultimately, the MNB's commitment to maintaining foreign exchange stability has been a consistent theme in its policy.