Hungary’s central bank kept its base rate unchanged at 6.25%, in line with expectations, but signalled a more dovish stance that validated market pricing for a June cut. Markets had already fully priced easing next month; after the meeting, expectations shifted towards a lower end-point for the cycle, with a terminal rate seen around 5.25% assuming the BUBOR premium returns to positive territory.
The repricing implies 100bp of easing from the current 6.25%. One forecast sets out a 25bp rate cut in June, with scope for one or two additional moves later in the year if risks continue to recede and the forint remains stable while yields stay supportive. In FX terms, the same view projects EUR/HUF at 350 by mid-year.
Forint Outlook Supported By Central Bank Policy Shift
The National Bank of Hungary is clearing the path for interest rate cuts, but we see this as a constructive signal for the forint. The bank’s willingness to start easing policy from a high of 6.25% suggests confidence in the economic outlook. We believe the market has now fully priced in a 25 basis point cut for the June meeting, removing near-term uncertainty.
We should use this clarity to position for forint strength against the euro in the coming weeks. Hungary’s interest rate remains significantly higher than the European Central Bank’s current rate of 3.0%, creating a compelling yield differential of over 300 basis points. This “carry trade” appeal should continue to attract capital, even with modest cuts.
Recent data supports this view, with Hungarian inflation cooling to 4.1% in April 2026, a sharp decline from the double-digit figures seen in previous years. This managed disinflation gives the central bank room to ease policy without creating alarm. This stands in stark contrast to the volatility that pushed the EUR/HUF exchange rate above 420 back in 2022.
Positioning For A Stronger Forint: Trading Strategies
Given our mid-year forecast for EUR/HUF to reach 350, we are looking at buying EUR/HUF put options. These options will profit as the exchange rate falls, aligning with our expectation of a stronger forint. We would focus on contracts expiring in late June or July to capture the anticipated move.
A more conservative strategy would involve a put spread, where we buy a put option and simultaneously sell another one at a lower strike price. This would lower the initial cost of the trade, offering a profitable return if the forint strengthens moderately as expected. The NBH’s clear communication should help dampen volatility, making this a suitable approach.
