EUR/HUF fell sharply on Monday, with the Euro weakening as the pair slid to its lowest level since February 2022. It was trading near 367, down about 2.25% on the day.
The Hungarian Forint strengthened after an election win by opposition leader Péter Magyar. His Tisza party won 138 seats in the 199-member parliament with 53.6% of the vote, ending Viktor Orbán’s 16-year rule.
With a supermajority, Magyar can amend the Constitution. He has said he will restore the rule of law, tackle corruption, strengthen democratic institutions, and reset relations with the European Union.
Orbán’s departure is seen as reducing Hungary’s alignment with Russia and easing EU tensions over support for Ukraine. This has increased expectations that withheld EU funds could be released, including a previously blocked €90 billion loan package.
A BHH report said the Forint could rise as political risk premiums fall, and that the election outcome is marginally supportive for the Euro by reducing EU political fragmentation risk. Goldman Sachs said a move towards euro convergence could include lowering Hungary’s inflation target from 3% to the Eurozone’s 2%.
Lowering the target would imply a fall in long-term yields, which could support the Forint over time. However, EUR/HUF later pared some losses amid wider FX volatility linked to US–Iran tensions after weekend talks in Islamabad failed to reach a deal.
The sharp fall in EUR/HUF to the 367 level is a significant break, smashing through technical support levels we saw hold throughout 2025. This move suggests the market is aggressively pricing out the political risk premium that has long weighed on the Forint. We should be cautious about chasing this initial move lower, as profit-taking could trigger a short-term bounce.
Implied volatility in EUR/HUF options has spiked to its highest level in over a year, reflecting the uncertainty that follows such a major political shift. This presents an opportunity to use strategies like selling call spreads above the 375 level, which would profit if the pair fails to rebound significantly. This allows us to capitalize on the new bearish trend while also benefiting from elevated volatility premiums.
Looking back, we saw the pair struggle to break below 380 for most of 2025, largely due to Hungary’s inflation which consistently hovered above the 3% central bank target. The new government’s potential move toward a 2% inflation target, in line with Eurozone convergence criteria, is a fundamental game-changer. This would signal a more hawkish monetary policy ahead, providing a strong, long-term support for the Forint.
The potential release of €90 billion in previously blocked EU funds is another major factor that cannot be ignored. This inflow of capital would dramatically improve Hungary’s balance of payments and boost investor confidence further. We must monitor communications from both Budapest and Brussels over the coming weeks for any confirmation of this development.
Given the new fundamental outlook, we should consider positioning for further Forint strength over the medium term. Instead of taking on direct short positions after such a sharp drop, buying EUR/HUF put options with a three-to-six month expiry seems more prudent. This strategy allows us to profit from a continued downward trend toward the 355-360 range while strictly defining our maximum risk.
