USD/HUF: Hungarian forint outlook ahead of key rate decisions

The Hungarian forint strengthened a bit against the US dollar as traders positioned themselves for the upcoming Federal Reserve and Hungary’s central bank decision. The USD/HUF pair was trading at 390, a few points below the year-to-date high of 398. 

Hungarian central bank decision

The USD/HUF exchange rate will be on the spotlight on Tuesday as Hungary’s central bank delivers its interest rate decision.

Economists expect that the bank will leave interest rates unchanged at 6.50%, where they have been in the last three meetings. 

This will be a crucial meeting because it will be the first one under Mihaly Varga, the recently appointed central bank governor. He is a Viktor Orban ally, who was the finance minister before. 

Varga’s goal will be to revive the economy, which has been ailing for a long time, ahead of the upcoming election in 2026. 

Therefore, there are odds that Varga will embrace a more aggressive rate-cutting policy in a bid to boost growth. In a recent report, the European Union warned that the Hungarian economy will grow by just 1.8% in 2025 after stagnating ths year. Its 2024 performance was the lowest in Europe and was much lower than the expected 3.4%. 

Hungary’s inflation has dropped in the past few years, as it moved from over 25% in 2022 to about 3.7% in November. Therefore, the decision by the bank to cut more rates would be justified.

In addition to low interest rates, the government is seeking to recharge the economy by investing in the housing sector and hiking salaries. 

Federal Reserve interest rate decision

The USD/HUF par will also react to the upcoming Federal Reserve decision scheduled on Wednesday. 

This will be a crucial meeting because it will set the tone for what to expect in the coming year under the Trump administration. 

The Fed has hinted that it will cut interest rates by 0.25%, bringing the year-to-date cuts to 1%. However, there are rising odds that the Fed will have a hawkish twist because of the pledged promises by Donald Trump. 

Trump has pledged to slash taxes, hike tariffs, and deport millions of illegal aliens, which are all inlationary. For example, huge tariffs for imported goods will lead to inflation since companies pass these costs to consumers.

Removing millions of illegal aliens in the country would also lead to labor shortages in the country, leading to high inflation numbers. 

These events will come at a time when the US is struggling to deal with inflation. Data released last week showed that the headline inflation rose to 2.7%, while core CPI moved to 3.3%.

USD/HUF technical analysis

USD/HUF chart by TradingView

The daily chart shows that the USD/HUF exchange rate retreated to 390 from the year-to-date high of 398.3. It has remained above the 50-day Exponential Moving Average, meaning that the bullish trend is still intact. 

The pair has also rallied above the key resistance point at 373.60, the highest swing in April and June this year. The Relative Strength Index (RSI) has moved from the overbought level at 70 to the current 52 and is tilting downwards. 

There are signs that the USD to HUF exchange rate has formed a bullish pennant pattern, a popular bullish sign. If this happens, the next point to watch will be at 398.34, followed by the psychological point at 400. 

The bullish view will become invalid if the USD/HUF pair drops below the 50-day moving average at 382.