EUR/HUF has fallen close to two-year lows. At the same time, the Hungarian forint is hitting new highs as markets expect the National Bank of Hungary (NBH) to cut rates. Pricing suggests two 25bp cuts in February and March, with more easing likely later on.
The forint has been supported by a risk-on mood toward emerging market currencies and by pre-election positioning. EUR/HUF is now at a level that many see as giving the NBH room to restart its cutting cycle. If the bank cuts next week, the damage to the currency is expected to be limited.
The market has often sold EUR/HUF rallies. That implies that any forint weakness could bring new buyers back in. Rate cuts reduce carry returns, which could slow further EUR/HUF declines, even if the forint continues to strengthen into the April elections.
Emerging market currencies have been steadier than developed market currencies this year as capital has flowed into emerging markets. This backdrop still supports the forint. Carry trading also remains attractive, even with rate cuts getting closer.
In early 2025, the forint was again testing new highs ahead of the NBH cutting cycle. We viewed that as a signal that the bank could start easing. By then, the market had already fully priced in two 25bp cuts for February and March. That reduced the risk that the first cut would hurt the currency.
With that setup, we treated any short-term forint weakness as a chance to add long positions. For derivatives traders, this pointed to selling out-of-the-money EUR/HUF call options to collect premium, based on the view that upside in the pair was limited. The market repeatedly sold rallies, which supported this approach.
From today’s perspective (February 19, 2026), the strategy worked well through mid-2025. But the picture changed as the NBH cut its base rate aggressively through 2025, bringing it down to 5.75%. As rates fell, the forint carry trade became less attractive, which helped put a floor under EUR/HUF. With January 2026 inflation at 3.8%, the central bank now has much less room to keep easing.
Because early-2025 cuts were clearly communicated, implied volatility on EUR/HUF options stayed relatively low. That made premium-selling strategies more appealing. A global risk-on phase for emerging markets also gave the forint a strong, but temporary, boost. We now know that sentiment shifted in late 2025, when global growth worries pushed investors back toward safe-haven assets.
Even though the rate gap between the Eurozone and Hungary was expected to shrink, carry was still attractive for traders shorting EUR/HUF via forwards. They could lock in a favorable rate and earn the roll yield. Today the forward curve is much flatter, showing that the policy-rate gap between the ECB and the NBH is far smaller than it was a year ago.
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