Goldman Sachs Lowers EUR/HUF Forecast on Hungary's Outlook

Goldman Sachs Revises Forint Forecast

Goldman Sachs has significantly lowered its EUR/HUF exchange rate forecasts and initiated a short recommendation on the pair. The revision is based on expectations of sustained appreciation for the Hungarian forint, driven by anticipated fiscal and inflation improvements under Hungary’s new government.

Favorable Policy Shift in Hungary

The incoming Tisza government, holding a two-thirds super-majority, is expected to pass legislation that could unlock EU funds and advance Euro adoption. Goldman Sachs notes that these developments are key drivers for the forint's strength, citing the potential for significant capital inflows and improved economic stability.

Impact on Currency Markets

The bank has updated its EUR/HUF targets to 355, 350, and 345 for three, six, and twelve-month horizons, respectively, down from 390, 380, and 375. Citing Slovakia's currency convergence as a historical parallel, the analysis suggests that sustained inflation convergence and productivity gains could further lower the pair's fair value, aligning the forint with regional peers like the Polish zloty and Czech koruna.

Summary and Outlook

The outlook for the Hungarian forint has turned positive following the election outcome. Goldman Sachs' recommendation to short EUR/HUF with a target of 350 reflects confidence that improved policy and potential EU fund disbursements will lead to significant currency appreciation.

FAQ

Q: Why did Goldman Sachs lower its EUR/HUF forecast?
A: The bank expects the forint to strengthen due to improved fiscal policy, inflation control, and the potential unlocking of EU funds under Hungary's new government.

Q: What are the new forecast targets for EUR/HUF?
A: The new targets are 355 for a three-month horizon, 350 for six months, and 345 for twelve months.

Source: Investing.com