UBS expects the Hungarian forint to firm further against the euro, targeting a range of 355-360 EUR/HUF in the months ahead following the opposition Tisza partys decisive victory in weekend parliamentary elections, according to a research note published this week.
The Tisza party secured more than two-thirds of seats in the general election, a result UBS says should permit a relatively smooth and possibly abbreviated transition period. Markets, the bank adds, are now concentrating on the new government's makeup, how quickly legislation is enacted to unlock European Union funds, and renewed assessments of Hungarys fiscal position.
EUR/HUF currently trades near 365, a level UBS had previously outlined in a late February scenario tied to an election outcome congruent with EU funds being released. The bank highlights that unlocking EU transfers at a pace equivalent to 2.5% of GDP in each of 2026 and 2027 would more than offset a projected current account deterioration of 1%-1.5% of GDP caused by higher energy costs.
UBSs analysis of historical balance-of-payments responses and real effective exchange rate elasticities indicates that a real effective appreciation of the forint on the order of roughly 10% is plausible under these conditions. On a relative basis, the bank says it favors the forint over the Polish zloty, citing Polands exposure to elevated energy prices, low real interest rates, and a fiscal deficit in excess of 7% of GDP.
The research note also sets out a deeper appreciation scenario. Taking EUR/HUF to 340 by the end of the year would require unsterilized balance-of-payments inflows between EUR10 billion and EUR14 billion, the bank says. UBS notes several pathways that could produce such inflows: an accelerated trajectory toward euro adoption by the new government, a rise in net foreign direct investment to around 3%-4% of GDP from a five-year average of 1.2%, or a positive productivity shock.
UBSs projections therefore rest on a combination of political developments, the pace of legislative action to access EU funding, and macroeconomic flows tied to energy and investment dynamics. Market participants will be watching how the new administration sequences policy and whether tangible disbursements and capital movements materialize to support forint appreciation.