CEE MARKETS-Forint gains on budget optimism, central bank decision in focus

WARSAW, Oct 20 (Reuters) - The Hungarian forint gained on Tuesday after the government presented a deficit-cutting 2027 budget and as investors awaited a central bank interest rate decision later in the day.

• The forint strengthened after Prime Minister Peter Magyar's government on Monday unveiled its 2027 budget, targeting a budget deficit of 4.9% of gross domestic product. It gained 0.2% to 362.70 per euro by 0729 GMT.

• Magyar said on Tuesday the government expected the deficit to narrow further to 2.8% of economic output by 2030, below the European Union's 3% ceiling.

• "We maintain our previous view that the (HUF) trade is currently too crowded, and we would not be surprised by a more significant correction, given how strongly Hungarian bonds rallied ahead of the budget plan's release," ING said in a note.

• "On the other hand, we remain bullish on the overall story, and we expect that, sooner or later, the market will begin to fade the higher yields."

• Hungarian investors were also awaiting a central bank rate decision due later on Tuesday. The National Bank of Hungary is widely expected to leave its base rate unchanged at 5.5% .

• Elsewhere, the Polish zloty was little changed at 4.3720 per euro.

• "Recent comments from members of the Monetary Policy Council (MPC) align with the slightly hawkish tone from the October meeting, which, in our view, reduces the risk of a depreciation of the Polish zloty," Bank Millennium analysts said.

• "The EUR/PLN exchange rate remains stable this morning, hovering around the 4.37 level. Today's data releases from the domestic economy are unlikely to have a significant impact on market pricing."

• Data published on Tuesday showed Polish industrial output rose 4.6% year-on-year in September, above analysts' expectations, and wages grew by 5.8% while analysts expected 6.1%.

• Bourses in the region mostly fell in line with global markets, with Warsaw .WIG20 leading losses with a drop of 0.6%.