The GBP/HUF is an interesting forex instrument that couples two economies that do not use the euro. Historically demonstrating high volatility thanks to the exotic Hungarian forint and a relatively stable base in the pound sterling, traders have the opportunity to expand their portfolio and capitalize on strong price movements, if they can accurately forecast swings.
Read on for a beginner-friendly guide to trading the GBP vs HUF. We also list the best GBP/HUF brokers in 2023.
GBP/HUF Trading Explained
With this pair, the GBP is the base currency, and the HUF is the quote currency. This means that, when given an exchange rate from an online broker or live chart, the value is how many HUF can be bought per 1 GBP.
Exotic currency pairs are composed of a major currency and a currency from a developing or emerging economy. In this article, we will explore GBP as the major and HUF as the exotic.
These pairs offer opportunities to diversify trading portfolios by moving away from the key players in the forex market.
Exotic pairs are arguably a double-edged sword, offering greater volatility but lower liquidity than major and minor pairs. The greater volatility of smaller markets provides more profit potential, thanks to larger and more sudden price movements, though this can also increase the risk of losses.
The lower liquidity of pairs such as GBP/HUF can also result in slippage, which is when orders fill at a different price from when it was requested.
The British economy is one of the biggest in the world, with the fifth largest nominal GDP sitting at an average of US$2.7 trillion. Its currency, the pound sterling (GBP), is the oldest in the world and is used in the UK and several overseas territories and islands. While the UK temporarily followed the gold standard in the 20th century, it has been a free-floating currency since 1971.
The GBP is the fourth most traded currency in the world, involved in 12.8% of daily FX trade volumes. This provides relatively good levels of liquidity, even for exotic pairs like the GBP/HUF.
The financial services field is the most prominent in the British economy, helping services contribute to 80% of the GDP.
The UK is also one of the biggest exporters and importers of goods and services in the world.
Britain’s top trading partners are the USA, Switzerland and Germany.
The Bank of England (BoE) is responsible for managing the pound sterling’s interest rates and monetary policies.
The second economy directly linked to the GBP/HUF FX pair, the Hungarian economy is much smaller, producing a nominal GDP of US$155 billion.
Although Hungary is a member of the EU, it has not joined the eurozone and instead manages its own currency, the Hungarian forint (HUF).The forint was introduced in 1946, after the Second World War, and was pegged to the price of gold until 2008, when it became free-floating.
Hungary’s GDP is mainly divided between 56.64% in services, followed by 24.52% in industry, and then 3.38% in agriculture.The economy places a large emphasis on foreign trade, with a high trade surplus of more than US$6.5 billion every year.Its top yearly averages in exports are refined petroleum at US$1.5 billion, petroleum gas at US$798 million, and corn at US$798 million.
Similar to the Bank of England with the GBP, HUF policies are implemented and managed by the Hungarian National Bank (HNB).Although the inflation target was 3% in the past, in recent months this has reached 11.7%.
By comparison, the BoE in the UK is expecting inflation to rise to 11% in 2022.From this perspective, the two economies are facing similar challenges.
GBP/HUF Exchange Rate History
Looking at graphs over the last 14 years, the trend for GBP/HUF has been positive since the Hungarian forint became free-floating in 2008.However, charts and diagrams also indicate a slowly weakening forint compared to the pound sterling.
On the GBP/HUF 10-year chart (2012-2022), the all-time high was set at 490 on the 12th of July 2022 and the all-time low at 249.58 on the 2nd of May 2016.
Factors Affecting GBP/HUF
Forex pairs are complicated instruments, with many different factors capable of causing changes in exchange rates and forecasts.Some of the most important tools for making comparisons are:
- Economic growth – The health and performance of an economy is directly linked to the performance of its currency.GDP graphs are a simple, widely used indicator of economic health that can be tracked to judge changes in GBP/HUF exchange rates.If the UK’s economy continues to grow, for example, then the price of the pair will likely continue to rise.
- Inflation – All economies are subject to inflation, and when a currency inflates, its strength relative to other currencies must decrease to reflect a balance in prices for goods and services.Look out for Consumer Price Index (CPI) reports from each country and compare each level to gauge whether one economy has strengthened or weakened next to the other.
- In 2022, inflation rates are estimated to increase to 11% for the UK and to 11.8% for Hungary.
- Monetary policy – Large differences in monetary policy between two currencies provides room for speculation on exchange rates, which can raise volatility.This could give an already volatile exotic pair like GBP/HUF even more profit potential, as well as a greater risk of losses.
- Other economic releases – There are many economic reports released each year by governments, such as consumer confidence, balance of payments and industrial production figures.Many experts attempt to predict the outcome of such reports, and the level to which these are correct or wrong often results in market changes.
GBP/HUF Trading Tips
When To Trade
Ensuring you trade at the right time is particularly important with exotic FX pairs like GBP/HUF.Its rate may seem favorable at a certain point but investing when liquidity levels are low and spreads are high can greatly mitigate profits, and sometimes even remove them.
The best time to invest in GBP/HUF is arguably during the overlap between the London Stock Exchange session and the Budapest Stock Exchange session, which occurs between 08:00 GMT and 16:00 GMT.This is when trading volume is highest, spreads are lowest and slippage is least likely to occur.
Where To Trade
Given the low trading volumes of exotic currency pairs, some brokers either do not offer them at all or offer poor spreads.
If you intend to trade GBP/HUF, check that your forex broker offers the pair, and with a competitive spread, preferably before opening an account.
Final Word On Trading GBP/HUF
Trading the GBP/HUF is an interesting opportunity that can provide investors with greater volatility and profit potential than the standard major and minor pairs. This can also increase the risks of loss, so be sure to refine your trading strategy, assess current events and analyze economic releases before investing. Real-time charts and exchange rate history are also key tools when making GBP/HUF predictions.
What Is The GBP/HUF Conversion Rate?
The current spot rate shows how many HUF converts to 1 GBP. This can be used as a converter by multiplying the number of pounds you want to sell for HUF or dividing your HUF to buy GBP. See our live chart above for the current exchange rate.
Will The Hungarian Forint Get Stronger In 2023?
The forecast for the GBP/HUF currency pair depends on several factors, including inflation rates as both economies are recovering from the Covid-19 pandemic and the war in Ukraine.
Will Hungary Join The European Monetary Union?
Hungary is currently preparing to adopt the euro and become a member of the EMU. However, there is currently no target date for the event and the forint is not yet within the exchange rate mechanism (ERM II).
How Can I Forecast The GBP/HUF Exchange Rate?
There is no end to forex trading strategies and data available online that can help predict exchange rates. On top of government-released statistics, graphs and diagrams, you should look over historical charts and consider current events to formulate your predictions or reassure yourself of a selected strategy.
GBP Vs HUF, Which Is The Stronger Currency?
Looking at the history of 1 GBP into HUF, the pound is significantly stronger.