EUR/HUF is trading back in the area around 410. Fighting inflation or the weakening currency – what is the Hungarian central bank’s (MNB's) motivation? The extent of further forint weakness is likely to depend mainly on monetary policy, economists at Commerzbank report.

MNB can not allow any doubts as to whether it is prepared to further tighten its monetary policy

“The MNB can not allow any doubts as to whether it is prepared to further tighten its monetary policy beyond the rate hike of 100 bps priced in for today. Otherwise, the market is likely to feel confirmed in its concerns that the MNB is being driven by the weakened forint which would then come under even more intense pressure.”

“If the MNB remains on a clearly restrictive course, we see potential for the forint. In particular compared with other Central and Eastern European currencies, as both the Polish and the Czech central banks have signalled that further rate hikes are unlikely for now. If the MNB sticks to further rate hikes though the forint could soon become an attractive alternative in the region.”