The Hungarian forint rebounded strongly in step with the bullish Czech koruna as the EUR/HUF pair dipped back to the zone 250 on Friday. There were no domestic fundamental news involved in Friday’s price action. The successful attack of the CZK on its all-time high was a trigger for visible forint’s strengthening before Friday’s noon. However once again the 250.0 level proved to be the strong support for EUR/HUF, which failed to break to fall below this technical barrier.
A meeting of the NBH Monetary Council will definitely the event of the day on Monday, although no change in the base rate expected. So, the meeting’s outcome should have a rather neutral impact on the forint. Thus, EUR/HUF might stay close to the 250 support. The market will, however, closely monitor post-meeting comments and any indication of possible support further easing within the Council. Let us remind that the latest Minutes showed that there was a dispute within the Council whether the easing cycle was over or if it can be reactivated. Much more danger for the forint may represent the recent sell-off in core equity markets, which will by definition elevate risk aversion in emerging markets. In such atmosphere high-yielding currencies (like the forint) may suffer losses. Hence watch the domestic equity markets today too, since it may bring some headwinds.
(CSOB - Investment research)