ING’s Frantisek Taborsky highlights the tender data calendar for Central and Eastern Europe, but focuses on Hungary, where the National Bank of Hungary is expected to resume its rate cut cycle with a move of 25 basis points to 6.25%. He sees further declines in March and notes that the risk-free sentiment from US trade headlines may be partially offset by a weaker dollar, with EUR/HUF testing showing resilience after recent lows near 378.

NBH cuts and positions itself in the spotlight

“Tomorrow, the National Bank of Hungary, in line with our expectations, will reopen the reduction cycle and reduce rates by 25 bp to 6.25%, for the first time since September 2024.”

“Particular attention will be paid to future forecasts; we expect that the February cut will not be a one-off and we should expect another cut in March.”

“Following the US trade news, the market can be expected to start the week in a risk-free mood and CEE currencies may suffer. Nevertheless, a weaker US dollar should offset this impact somewhat and the sell-off in the region in recent days should help keep CEE currencies stable.”

“The main focus will be on the EUR/HUF rate, which will test the strength of carry positioning once NBH starts cutting rates again. The market is fully pricing in a rate cut in February and March, so we do not expect significant damage unless NBH surprises with dovish guidance.”

“Nonetheless, EUR/HUF retested the 378 level last week, which is a two-year low, and a rate cut will push the pair higher. Meanwhile, the market has repeatedly shown willingness to capitalize on higher levels for new long forint positions.”

(This article was created with the support of an artificial intelligence tool and has been reviewed by an editor.)