ING’s Frantisek Taborsky highlights a light CEE data calendar but focuses on Hungary, where the National Bank of Hungary is expected to restart its cutting cycle with a 25bp move to 6.25%. He sees further cuts in March and notes that risk-off sentiment from US trade headlines may be partly offset by a weaker Dollar, with EUR/HUF testing carry resilience after recent lows near 378.

NBH cuts and carry positioning in focus

"Tomorrow, the National Bank of Hungary, according to our expectations, will open the cutting cycle again and cut rates by 25bp to 6.25%, the first time since September 2024."

"Particular attention will be paid to forward guidance; we expect the February cut not to be a one-off, and we should see another cut in March as well."

"After the US trade headlines, the market can be expected to open the week in a risk-off mood, and CEE currencies may suffer. Still, the weaker US dollar should offset this impact somewhat, and the sell-off in rates in the last few days in the region should help keep CEE currencies stable."

"The main focus will be on EUR/HUF, which will test the strength of carry positioning after the NBH restarts rate cuts. The market is fully pricing in the rate cut in February and March, so we do not expect significant damage unless the NBH surprises with dovish guidance."

"Still, EUR/HUF tested 378 again last week, a two-year low, and the rate cut will push the pair higher. Meanwhile, the market has repeatedly shown a willingness to use any higher levels for new forint longs."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)