The Hungarian forint moved up and down yesterday

The market movers were initially a rebound of the Polish zloty and recovery on emerging equity markets, while a bearish correction began just after a release of results of the domestic bond auction. It showed that both 5Y and 10Y government bond papers found sufficient demand, but respective bid-cover ratios very substantially lower compared to the previous actions held four weeks ago. Nevertheless despite the higher volatility, the EUR/HUF pair did not leave the 251 zone for the whole session. It is worth noting that Hungary’s President has announced dates for a general parliamentary election. Hungarians will vote on April 9 and April 23, which means slightly earlier than it was previously expected. In our view this news should have a neutral or slightly positive impact on the market, because the sooner a new government will be in power the sooner the market will get to know fiscal plans for next four years.

Given the empty domestic eco calendar the forint will look to other markets for inspiration, where the Polish FX market and European bond market should play a leading role.

A potential threat for the forint represents especially a bearish development in the euro-zone bond market, which (if it lasts) might put pressure on Hungary’s bonds and might have an indirect impact on the currency.

(CSOB - Investment research)