NBH cut base rate by 15 bps yesterday. My expectation was for 10 bps only + some less dovish comments or some hints on the future to be rather cautious.
However NBH surprised the mkt with not just cutting the rate, but keeping its extremely dovish stance. I clearly believe that NBH is either doesn't understand what is the risk of cutting rates too low, or they do understand it, but policy really wants to see EURHUF a lot higher. So the breakout took place to the upper side.
Immagine if EURHUF trades at these levels in a relatively global environment, what will happen to it, when things turn back corrective or medium term bearish?
HUF is more and more vulnarable, no rate differential at all. Funny thing is that ag. PLN it is positive carry to hold HUF shorts! I won't be surpised if in a next meltdown hungarian rates and ccy will become one of the major target for a HF attack. Next tgt on is ard 320. One thing to keep in mind: NBH is well loaded with FX reserves now to protect it at some point.
For those who missed the long entry: watch USDHUF long instead to play . In case EURUSD turns around, USDHUF will have a huge potential to blow up. Maybe ard 240 lvls.