The Hungarian forint gave up part its post-election gains as bearish sentiment in core markets was fully reactivated yesterday. Hence the FX market was driven by external factors as domestic politics was not a market mover yesterday. Nevertheless profit-taking in domestic equity market could be a negative factor too.
Looking at the intra-day trading: the EUR/HUF pair initially hovered in the 263 zone, but market sentiment began to deteriorate after the release of the German IFO index and bearish mood intensified in the afternoon when the US bond market was active Hence in the afternoon EUR/HUF spiked to the 265 territory. Although the pair closed at the 264.60 level, it moved further north during the off-shore trading.
Today, the forint has started the session on a weaker footing as EUR/HUF operates around yesterday’s closing levels. No domestic moving factors should be in place today, so the forint should particularly watch euro yields. Should they continue to rise EUR/HUF might march higher, possibly to the 266 zone.
(CSOB - Investment research)