EUR\/HUF has moved close to two-year lows, while the Hungarian forint is testing new highs ahead of expected National Bank of Hungary (NBH) rate cuts. Market pricing includes two 25bp cuts for February and March, with further easing expected later.<\/p>\n
The forint has been supported by risk-on sentiment towards emerging market currencies and by pre-election positioning. The level of EUR\/HUF is seen as allowing the NBH to restart its cutting cycle, with limited damage expected if the bank delivers a cut next week.<\/p>\n
Market behaviour has tended to sell rallies in EUR\/HUF, implying that forint weakness may attract renewed buying interest. Rate cuts reduce carry returns, which may slow further declines in EUR\/HUF, even if additional forint gains occur ahead of April elections.<\/p>\n
Emerging market currencies have been steadier than developed market currencies this year as capital has moved into emerging markets. This environment continues to support the forint, while carry trading remains favourable even with cuts approaching.<\/p>\n
Back in early 2025, the forint was testing new highs ahead of the Hungarian National Bank’s (NBH) cutting cycle, which we saw as a green light for the bank to begin easing. The market had already fully priced in two 25 basis point cuts for February and March of that year. This meant the initial rate cut was unlikely to damage the currency significantly.<\/p>\n
Given this backdrop, we viewed any temporary forint weakness as an opportunity to enter new long positions. For derivative traders, this suggested selling out-of-the-money EUR\/HUF call options to collect premium, betting that the pair’s upside was capped. The market repeatedly showed its willingness to sell into any rallies, supporting this view.<\/p>\n
Looking back from today, February 19, 2026, that strategy paid off through mid-2025. However, as the NBH aggressively cut its base rate throughout 2025 to the current 5.75%, the appeal of the forint carry trade diminished and put a floor under the pair. With January 2026 inflation coming in at 3.8%, the central bank now has far less room to continue its easing cycle.<\/p>\n
The clearly signaled rate cuts in early 2025 kept implied volatility on EUR\/HUF options relatively low, which favored traders selling premium. The global risk-on mood for emerging markets provided a strong, albeit temporary, tailwind for the currency. We now know this sentiment shifted in late 2025, as global growth concerns pushed investors toward haven assets.<\/p>\n
Even as the interest rate differential between the Eurozone and Hungary was set to narrow, the positive carry was still attractive for those shorting EUR\/HUF using forward contracts. This allowed traders to lock in a favorable rate while earning the roll yield. Today, the forward curve is much flatter, reflecting a significantly smaller gap between ECB and NBH policy rates than we saw a year ago.<\/p>\n","protected":false},"excerpt":{"rendered":"
Forint nears two-year highs as rate cuts loom; risk-on flows and elections support, limiting downside.<\/p>\n","protected":false},"author":62,"featured_media":0,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-42220","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/42220","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=42220"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/42220\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=42220"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=42220"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=42220"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}