EUR/HUF drops to 2-day lows on hawkish MNB

• EUR/HUF breaches 360.00 post-MNB decision.
• The Hungarian central bank (MNB) hiked rates by 30bps.

The Hungarian forint leaves behind the earlier weakness and now drags EUR/HUF to the area of 2-day lows in the sub-360.00 region.

EUR/HUF weaker on MNB decision

EUR/HUF reverses two consecutive daily advances and slips back below the 360.00 mark after the MNB surprised markets by delivering a larger that expected interest rate hike at its meeting on Tuesday.

In fact, the central bank raised the policy rate by 30bps (vs. consensus for a 20bps hike) to 1.20%. It is worth recalling that the MNB already raised rates by 30bps back in June to 0.90%. That was the first move on rates since July 2020, when the advance of the pandemic forced the MNB to reduce rates to 0.60%.

Persistent high inflation in Hungary and prospects for a strong rebound in the domestic demand pari passu with the re-opening of the economy in the post-pandemic era prompted the MNB to intensify the hawkish message that was already in place since earlier in the year.

EUR/HUF relevant levels

At the moment the cross is losing 0.62% at 358.88 facing the next support at 358.16 (200-day SMA) followed by 356.92 (weekly low Jul.22) and finally 354.75 (weekly low Jul.12). On the other hand, a surpass of 362.41 (monthly high Jul.26) would expose 364.29 (monthly high Apr.23) and then 369.07 (2021 high Mar.18).