Hungary’s election ended Viktor Orbán’s 16-year period in power, with Peter Magyar’s Tisza party on course for a supermajority. A two-thirds majority would allow Magyar to change institutions and the constitution more easily.
Plans include removing Orbán-aligned figures such as the president, senior judges, the chief prosecutor and heads of state regulators. Magyar has also said he will introduce a two-term limit for prime ministers.
Institutional Reset And EU Alignment
The proposed reforms could align Hungary more closely with EU standards and help release more than EUR20 billion in EU funds that are currently frozen over rule-of-law and corruption concerns. Under Orbán, Hungary blocked a EUR90–103 billion loan package intended to support Ukraine and repeatedly delayed or blocked EU aid and sanctions linked to Ukraine.
Following the result, the forint strengthened by over 2% against both the euro and the US dollar. The move adds to the forint’s strong performance among emerging market currencies this year.
Following the major political shift in Hungary back in April 2025, we saw the forint stage a powerful rally. This initial move was driven by the end of Viktor Orban’s rule and the expectation of normalized relations with the EU. The market priced in a significant amount of good news very quickly.
A year later, the currency’s momentum has stalled, even with tangible progress being made. After strengthening nearly 8% against the euro in 2025, the EUR/HUF exchange rate has been trading in a relatively tight range between 360 and 368 for the past quarter. While recent data shows the European Commission has disbursed over €12 billion in previously frozen funds, the market seems to be waiting for the next major catalyst.
Options And Volatility Setup
This period of consolidation has pushed implied volatility on EUR/HUF options down to multi-year lows, currently near 7.5% for one-month contracts. For us, this makes buying options an attractive strategy to position for a directional breakout, which could be triggered by news on the remaining EU funds or further institutional reforms. The low cost of options provides a cheap way to gain exposure to the forint’s next potential leg of appreciation.
We must also consider the Hungarian National Bank’s policy, as the country’s improved risk profile gives it more room to cut interest rates than its regional peers. Historically, similar political turnarounds, like the one we saw in Poland after its 2023 election, led to a sustained period of currency strength as foreign investment returned. Therefore, we should monitor interest rate derivatives to position for a potential divergence in monetary policy between Hungary and the ECB.
