Goldman Sachs Adjusts EUR/HUF Forecasts#
Goldman Sachs has recently lowered its forecasts for the EUR/HUF currency pair, which represents the exchange rate between the Euro and the Hungarian Forint. The bank now expects the forint to appreciate, or strengthen, due to anticipated improvements in Hungary's fiscal policy and inflation rates under the new government.
New Forecasts and Recommendations#
The updated forecasts for the EUR/HUF are set at 355, 350, and 345 for three, six, and twelve months, respectively. These figures are significantly lower than previous estimates of 390, 380, and 375. Additionally, Goldman Sachs has recommended a trading strategy to short the EUR/HUF, meaning they suggest betting against the Euro in favor of the Forint, with a target exchange rate of 350.
Impact of the New Government#
The incoming Tisza government in Hungary has a strong majority in Parliament, which will allow for quicker legislative actions. This is expected to facilitate the release of European Union (EU) funds and advance Hungary's adoption of the Euro. Goldman Sachs believes that the disbursement of EU funds could further strengthen the forint, based on their economic model.
Historical Context and Future Expectations#
Goldman Sachs draws a comparison to Slovakia, where the Slovak koruna appreciated significantly during its transition to Euro adoption. The bank notes that if Hungary can achieve a similar trajectory, the forint could see substantial gains. They also mention that if inflation stabilizes around 2%, it could help maintain the new EUR/HUF levels, while improved productivity in Hungary could further enhance the forint's value.