Goldman Sachs has sharply reduced its EUR/HUF exchange rate forecasts, anticipating Hungarian central bank rate cuts and easing inflation. The firm recommends full short positions on the pair amid elevated short exposure levels.
Revised Exchange Rate Projections
Analysts at Goldman Sachs adjusted their three-month, six-month, and 12-month EUR/HUF forecasts downward from 390, 380, and 375 to 355, 350, and 345, respectively. In its base case, the firm targets 350 for EUR/HUF, with a worst-case scenario at 372 for short positions.
Key Drivers Behind the Outlook
Hungarian central bank policy supports further rate reductions, while inflation trends point to cooling pressures. Market pricing reflects excessive eurozone easing expectations, with two-thirds of surveyed traders anticipating an ECB base rate freeze and interventions to bolster the euro. However, Goldman Sachs views these bets as overstated.
The firm relies on its GSFEER model to project EU base rate trajectories, which could strengthen the forint. Eurozone exchange rates remain undervalued, offering potential for appreciation.
External Factors Influencing the Forint
Geopolitical tensions from the Uaine conflict, coupled with energy price fluctuations and eurozone production disruptions, have driven a 20% euro depreciation. Easing inflation adds another 2% upside potential for EUR/HUF stabilization.
Production dynamics in Poland and the Czech Republic also factor into regional currency adjustments. A combined 10% forint appreciation could maximize profitability, even accounting for these influences.
These projections have captured significant investor interest amid ongoing market volatility.
