Hungary’s forint surged after Prime Minister Viktor Orban conceded defeat in Sunday’s election, with the pro-European opposition’s landslide victory expected to help unlock billions of euros in European Union funding.
The currency appreciated 2% to 367.41 against the euro in early Asian trading, the strongest level since April 2022. The results vindicate bets by investors who have been positioning for an historic win by Peter Magyar’s Tisza party.
The results are an overwhelming rebuke to Orban’s self-styled “illiberal democracy,” which has been backed by both US President Donald Trump and Russian leader Vladimir Putin. With 95% of the votes counted, Tisza was set to win a commanding two-thirds majority that will allow it to quickly pass legislation unopposed and dismantle the system Orban built over 16 years in power.
A supermajority for Magyar means the market will have “another reason to extend the forint rally,” said Frantisek Taborsky, a strategist at ING Bank NV in London. The gains may come even amid a risk-off turn in market sentiment after weekend peace talks between the US and Iran failed, he said.
Investor positioning in Hungary was difficult to read due to developments in the US-Iran conflict, but the forint’s return to pre-war levels last week suggested that the market was already pricing in a simple Tisza victory, Taborsky said.
‘Significant Thaw’
Magyar’s ascent to power is seen helping unblock access to EU financing, which has been partly frozen by Brussels due to rule-of-law breaches by Orban’s administration. Tisza has also vowed to take steps toward joining the euro area, which would reduce Hungary’s borrowing costs, currently among the highest in the EU with the yield on 10-year local-currency government bonds averaging about 7% over the past 12 months.
“We can expect a significant thaw in relations between Budapest and Brussels,” said Michał Jóźwiak, a currency analyst at Ebury. That should lead to the release of about €17 billion ($20 billion) in EU funds as well as low-interest loans for defense spending, providing a “significant growth stimulus for the Hungarian economy,” he said.
A supermajority result, if confirmed, will likely lead to a sharper rally in the forint as well as Hungarian stocks, Jóźwiak said.
Wagers on a seismic shift in Hungarian politics had already helped the forint surge 7% against the euro and 21% against the dollar last year — the most among major emerging-market peers behind the seldom-traded Russian ruble. Budapest’s BUX equities index closed just below a record high on Friday.
There’s “more outperformance to come” in Hungarian stocks, Morgan Stanley economists and strategists including Georgi Deyanov wrote in a note to clients. “If the new government were to succeed in unlocking access to EU funds, this could materially improve market confidence.”