Hungarian Forint: Rally meets fiscal concerns – Societe Generale

Societe Generale strategists highlight that the HUF has delivered its strongest quarter since 2009, supported by a pro‑EU shift and expectations of renewed EU fund access. However, they warn that EUR/HUF is struggling to sustain breaks below 350 as fiscal risks emerge under PM Magyar. Narrower bond spreads and modest central bank of Hungary Magyar Nemzeti Bank (MNB) easing suggest limited room for further compression near term.

Pro‑EU shift versus fiscal slippage

"In CEE, the HUF delivered its best quarter since 2Q09 (+7.8% vs EUR on spot basis), driven by a clear pro‑EU shift following the resounding election victory of PM Magyar in April."

"That said, signs of bullish exhaustion have emerged, with EUR/HUF struggling to sustain a break below the key 350 handle."

"PM Magyar flagged a significantly wider fiscal gap than previously disclosed, with the deficit potentially exceeding 8% of GDP this year vs the prior government estimate of 5%."

"This underscores the scale of consolidation required, especially given the stated ambition to adopt the euro by 2030."

"On the monetary side, the MNB embarked on a modest easing cycle, cutting rates by 25bp to 6.0%, which modestly reduces FX carry support."

"In rates, the 10y HUGB now trades at a 25bp premium versus a pre-election discount of ~150bp, highlighting a sharp repricing but also suggesting limited room for further compression near term."