Forint Weakening in Global Risk-Off Environment

The Hungarian Forint has recently experienced weakness in the global market risk-off environment, reflecting its high-beta status within the Eastern European peer group.

According to Commerzbank's Tatha Ghose, this near-term correction should not be over-interpreted as the forint has only given up a fraction of its outperformance since the April election, which brought regime change.

The regime-change story itself has not disappointed, with Tisza's ratings remaining strong and Peter Magyar moving ahead with reforms on multiple fronts.

If global risk sentiment improves, Ghose expects EUR/HUF to recover towards 350-355. However, he warns that accelerating core inflation and narrowing real interest rates as the MNB cuts will later weigh on HUF, limiting the durability of any interim recovery.