COMMENT-Hungary's weak forint has further to fall

Potential for a marked deterioration in the Hungarian backdrop could see a nine-month 8% depreciation in the forint extend by another 3-5% in the coming months.

Hungarian inflation is falling faster than expected, increasing the chances of further rate cuts from the central bank, weakening the HUF.

Uncertainty over the payment of European Union funds to Hungary will worry investors and leave the HUF vulnerable. Politico reported that the European Parliament was preparing to sue the European Commission over its decision to unfreeze billions of euros in funds for Hungary that had been locked up in rule-of-law disputes.

A rift between the Hungarian government and the National Bank of Hungary regarding the pace of rate cuts could widen Wednesday as the government is likely to discuss a law change widening its oversight over the central bank, a move the bank's governor has criticised.

EUR/HUF's bull trend accelerated Tuesday and big chart levels are looming large. The weekly Ichinoku cloud top and a 50% Fibonacci level are at 400.98. A weekly double top from Mar. 2023 is at 402.00-402.50. Further retracement levels, 61.8% and 76.4%, taken off the 434.70-367.55 Oct. 2022-Jun. 2023 are at 408.86 and 418.62.