The announcement of Hungarian official leaders from the government about the abolishment of foreign currency denominated housing loans in the near future pushed HUF to a weakening trend. So the EURHUF pair reached 300 levels, which has been a strong resistance level in the last 3 months. Technically we see a weakening trend of HUF since end-May with a narrowing triangle. We expect that around EURHUF 300 levels may stop HUF weakening in short-term and may strengthen to around 295, but the repayment of the FC denominated housing loans may keep an ongoing weakening pressure on HUF in the coming months. As the NBH reached its first important target of base rate at 4%, we expect that MPC will slow rate cut cycle and may cut base rate by 15-20bp in August.
Meanwhile, a situation on the Hungarian labour market improves very slowly. The unemployment rate decreased from 10.9% in April-June 2012 to 10.3% in this year, so the number of unemployed people moderated from 472 thousand to 449 thousand. It also shows that the activity rate rose from 56.8% to 57.4%.
There has been an improvement of the employment rate too. The employment rate in the age group of 15-74 years old people increased in the period of April- June from 51.5% from 50.6% a year before. It means that 55 thousand more people were employed in this year than in the same period in 2012. The main reason of the sharp rise of the employment rate is mainly the public forced work program. In this program roughly 150 thousand people are working and the participation was increased by more than 30 thousand in a year time. Employees statistic showed in May that private sector was able to employ 10 thousand less people than a year before. This figure reflects that without the public work program Hungary would not be able to create substantial amount of new work places and as there is not expected a fast GDP growth in the next 6 months, the labour market may remain weak and supply driven, which may keep domestic consumption at a low level.