CEE Currencies Set to Weaken Against Euro Amid Policy Risks

The Central and Eastern European (CEE) currencies are set to weaken against the Euro this week due to policy risks. Societe Generale notes that the Hungarian Forint (HUF), along with other CEE currencies, is expected to drop by around 3% against the Euro.

This decline is attributed to the fall in EUR/USD below 1.14. The central bank of Hungary, Magyar Nemzeti Bank (MNB), kept interest rates at 5.50% and reduced its inflation target from 3% to 2.5%, starting from 2028.

This hawkish signal briefly pushed the EUR/HUF pair to its 100-day moving average of 359.76, lifting 10-year HUFGB yields by 11 basis points to 5.87%. The MNB's stance is consistent with Hungary's goal of adopting the Euro in 2030.