Hungarian Forint Could Correct Lower if Ukraine Optimism Fades — Market Talk

The Polish zloty's recent sharp rally versus the euro reflects improving global risk appetite, Commerzbank's Tatha Ghose says in a note. The risk sensitive zloty and Hungarian forint are the main beneficiaries of the pick-up in market sentiment, he says. There isn't "much else going on" although it "might seem otherwise when focusing on one currency at a time." The zloty is no longer outperforming the forint, even though Poland's monetary policy stance is tighter company to Hungary's. If the rally in risky assets peters out, the zloty could resume outperformance versus the forint but it would lose ground versus the euro. EUR/PLN reached a seven-year low of 4.1476 Tuesday, according to FactSet.(renae.dyer@wsj.com)

Central and eastern European currencies could continue to rise on optimism over a Ukraine-Russia peace deal, ING's Frantisek Taborsky says in a note. President Trump said he held a constructive phone call Wednesday with his Russian counterpart Vladimir Putin about a ceasefire in Ukraine. Similar headlines could be forthcoming, supporting central and eastern European currencies, Taborsky says. These currencies are also supported by a higher euro versus the dollar and improving rate differentials, he says. "We expect the current rally to continue until at least the end of the week." EUR/PLN hit a seven-year low of 4.1567 earlier, according to FactSet. EUR/HUF reached a 16-week low of 400.960 earlier. (renae.dyer@wsj.com)

The Polish zloty, Hungarian forint and Czech koruna rally on the prospect of a deal to end the war in Ukraine after the U.S. Trump administration mentioned progress on this, ING's Frantisek Taborsky says in a note. "The simultaneous rally in FX and rates suggests that positive sentiment on this [Ukraine] is likely driving the move." The zloty is particularly strong after Polish central bank Governor Adam Glapinski said Thursday there is no indication for interest rate cuts in 2025. The Polish zloty rises to its highest since April 2018 at 4.1860 per euro; the Hungarian forint hits a three-month high of 404.0331 per euro; and the Czech koruna rises to a six-week high of 25.0150 per euro, according to FactSet. (renae.dyer@wsj.com)

The Hungarian forint rises slightly after Hungary's central bank left its key interest rate unchanged at 6.50% as expected. It marks the fourth consecutive meeting rates have been held steady, with the central bank having last cut rates in September. "With upside inflation risks from strong wage growth likely to remain high and the forint likely to come under pressure amid challenging external financing conditions, an extended rate [cut] pause looks likely," Capital Economics economist Liam Peach says in a note. The next rate cut is unlikely until mid-2025 with potentially 100 basis points of cuts in total for this year, he says. The EUR/HUF falls to 407.8895 after the decision from 408.1015 beforehand. (renae.dyer@wsj.com)

The Hungarian forint could rise if the National Bank of Hungary leaves interest rates unchanged and repeats its cautious tone about rate cuts, ING's Frantisek Taborsky says in a note. "This we believe is a condition for HUF assets to rally as well," he says. In the medium term, however, the forint could weaken, he says. The central bank's tone should shift back toward favoring rate cuts at some point this year. The euro could also fall against the dollar, pushing EUR/HUF higher given its positive correlation. ING expects EUR/HUF to rise to 420.000 at the end of the first quarter or later, depending on global factors. EUR/HUF trades flat at 408.355. The rate decision is expected at 1300 GMT.(renae.dyer@wsj.com)

remains cheap and oversold despite Monday's rebound, said ING.

The bank estimates that the pair is still trading around 1.5% below its short-term fair value, signaling that some United States tariff-related risk remains in the price.

The euro could fare well if time passes without the European Union being explicitly mentioned in U.S. President Donald Trump's tariff comments, stated ING. That support may, however, prove rather short-lived as things can — as markets learned Monday with Canada and Mexico — change abruptly on protectionism, and the euro remains generally unappealing from a number of macro fundamentals.

This means any rebound may well fall short of 1.050 in , wrote the bank in a note.

was "unfazed" early Tuesday by the release of United Kingdom's labor figures. Wage growth excluding bonuses was slightly higher than expected. However, the month-on-month increase in private sector pay, which the Bank of England closely monitors, was more subdued.

This figure has been fluctuating and follows a stronger reading previously, pointed out ING. Unemployment figures have been rather unreliable, but there are still broad indications that the jobs market is cooling enough to reduce wage growth over the year ahead.

The BoE's recent CFO survey shows expected wage growth dropping below 4% in recent months. This doesn't significantly alter the BoE's outlook, with a February rate cut still ING's base case.

is looking at some upside risks in the short term as markets can still price in more BoE easing and continue to embed idiosyncratic sterling (GBP) risks related to higher borrowing rates. At the same time, the euro could see some tentative relief on Trump not targeting the E.U. with tariffs for now.

moved down the trading range to 4.250-270 and it looks like markets will test the lower bound in the coming days thanks to the hawkish central bank of Poland support, added ING.

also briefly touched 410, this year's lows, allowing Hungary's forint (HUF) assets to show some rally as well.

In the medium term, the bank expects to head towards 420, but in the short term, ING believes the pair can stabilize around 412.

also briefly headed lower but saw the biggest pullback within Central and Eastern Europe Monday, and ING believes it will stay closer to 25.300 until the Czech central bank shows more dovish headlines ahead of its February meeting, which could be as early as the end of this week.