The trading with CEE currencies was yesterday mixed. While the Czech koruna reacted on higher than expected inflation and strengthened to its two-week high, the Polish zloty, without any significant stimuli was easing through the whole session. On contrary, the sentiment on the Hungarian FX market remains positive.
The forint yesterday continued in its strengthening path and ended the session at 292.8 EUR/HUF. So the forint hit the strongest value for the last three weeks despite the fact that the foreign trade data showed yesterday that the Hungarian foreign trade surplus did not reach record high as the market had expected.
After the negative surprise of May industrial production figure, foreign trade data shows also a slowdown of economic revival in May. Export decreased by 1.9% YoY in May while import was down by 0.9% YoY in May. Export and import expanded by 11.7% YoY and 7.6% YoY respectively in April. As the industrial production increased every month in January and April period on month-on-month basis, market became slightly more optimistic about the economic recovery in Hungary.
The latest figures confirm our conservative view that Hungary may be able to avoid recession in 2013, but the dynamic of growth may remain modest and real GDP growth may be around 0.3% YoY in 2013. Foreign trade figure also confirms our view that domestic demand remained subdued in 1H13, so Hungary’s economic performance still depends on the external environment and mainly on the European developments.
As a positive effect of the balance adjustment process, the foreign trade balance was EUR653m in May and YTD EUR3.1bn, which is the second highest read in the history. 12m rolling trade balance to GDP figure circulated around 7.5% in the last one year. German IFO index suggest that export may catch up slightly in the following months, so foreign trade surplus may widen further. Poor economic outlook calls for continuation of rate cut cycle, base rate may cut by 25bp to 4% in July.
Concerning today’s session, the macroeconomic calendar is empty. In the Czech Republic the president Miloš Zeman should name the new government, nevertheless the cabinet has than 30 days to ask the Parliament for confidence, thus today’s act will not have any impact on regional forex markets. As concern fixed-income markets – there are two bond auctions in the Czech Republic. We expect strong bids as yesterday’s press conference at the Czech MinFin confirmed again that government bond issuance will be very low this year.