The Euro and the Hungarian forint pair is characterized by high volatility and low liquidity, but at the same time it is easily predictable, due to which it is used by traders according to the situation.
Euro is used by 19 EU countries. This currency is one of the most popular among traders due to its easy predictability and very high liquidity. Moreover, the main influence factors concern not so much the policy or real economic indicators as the position of the European Central Bank on the issue of interest rates.
This is because the EU economy always achieves good results at the expense of developed countries such as Germany and France. At the same time, troubled countries, such as Greece, can make unexpected amendments and significantly affect the euro
But these deviations quickly become normal and do not pose big problems for EUR. As a result, the currency has low volatility, which is very much appreciated by cautious traders.
Hungarian Forint (HUF) is the national currency in Hungary. Such a name uncharacteristic for the Magyar language comes from the Italian city of Florence. In the 12th century, coins minted there came into use in Hungary and took root there.
But the era of gold and silver money is long over, and the post-Soviet countries had to overcome the crisis that happened after the collapse of Yugoslavia, and then the USSR. Hungary did this through a constant emission of funds.
As a result, inflation in the 80s of the twentieth century reached 35-40% per year. As a result, this led to the fact that the exchange rate at the time the euro was created was very high. This led to almost zero liquidity of the pair.
In 2010, young and progressive politicians came to power in the country and put in a lot of effort and over the past 5 years improved the basic indicators of Hungary by 4-6 times.
One of the fruits of positive changes was the influx of foreign investment. In 2018, the country received an inflow of funds of 73 billion dollars.
Not surprisingly, traders have recently begun to pay attention to the EUR/HUF pair. In the conditions of unstable markets, the instrument may as well bring good profit.
To analyze possible euro adjustments, you need to pay attention to the actual economic indicators in Europe. First of all, we are talking about the Consumer Price Index. It reflects the likely fluctuations in inflation.
The growth of the index is influenced by such factors as a decrease in household incomes, an increase in unemployment, and the breaking of established trade relations. As a result of the described events, citizens have less money, and manufacturers and sellers seek to compensate for losses by raising prices for goods.
For most European countries, this situation is uncharacteristic but quite possible. This is especially true for those who are at the stage of transition to a developed economy. First of all, this applies to Hungary.
This is the first factor in the joint correlation of the EUR/HUF pair. It shows that Hungary’s problems will not greatly affect the euro. If the situation is so critical that it affects the overall CPI results, a decrease in the strength of the euro will also weaken the forint.
Moreover, the relationship will not be direct, but with sufficiently high volatility and marginality. But such fluctuations are associated with the publication of important economic news and are not too frequent.
The second important point concerns salaries and employment. The wage level in Hungary is much lower than in Europe as a whole. This leads to the fact that the local population often leaves for work in more developed countries.
Although this is not an obvious source of influence on the strength of HUF, it does have a place to be. The outflow of the local population leads to a reduction in the manufacturing sector of the country's economy. This, in turn, leads to lower exports and lower GDP. As a result, the forint is losing value.
The situation is not permanent; most workers leave for seasonal projects. But such migrations cause high exchange rate fluctuations characteristic of the EUR/HUF pair.