Rally to be contained on a NBH rate hike – ING

The NBH meets today to set interest rates. Consensus is looking for a hike to 1.75%. EUR/HUF has seen a volatile ride over recent weeks but a 25bp rate hike is set to stall the pair’s rally, economists at ING report.

NBH has good cause to hike

“ING’s Peter Virovacz looks for a 25bp hike and further indication that the base rate be hiked towards 2.50% by year-end – a move yet to be fully priced in by money markets.”

“Assuming the NBH does deliver a hawkish 25bp hike today, we think the EUR/HUF rally can be contained. Indeed, the market may start to look at HUF through the prism of loose fiscal and tight monetary policy and as long as NBH delivers the tight monetary policy part, EUR/HUF should trade back below 350 again when global risk sentiment settles.”