With strong domestic data and a continued summer lull, the NBH has the luxury of waiting for other central banks to show their hand
The upcoming National Bank of Hungary rate-setting meeting tomorrow (22 August) is unlikely to ruffle the calm summer trading period. We don't believe the timing is right for any policy changes, atleast not until the September meeting. In our view, domestic data does not warrant any NBH response either; as such, the NBH has the luxury of waiting for other central banks to ‘show their hand’.
We believe the NBH is well aware of the current summer lull, where strong fundamentals, paired with low volatility, low trading volumes and Polish political woes, have driven HUF stronger.
As such, we think it would be too early for the NBH to meaningfully react to HUF strength, as long as EUR/HUF: (a) continues to gravitate around the 305 level; and (b) the 303 resistance holds. As additional liquidity is likely to be injected during the NBH’s September meeting, we look for EUR/HUF to move above 305 in coming months.