The Hungarian forint gave up its Monday’s gains as it tracked the Polish zloty lower yesterday

The Hungarian forint gave up its Monday’s gains as it tracked the Polish zloty lower yesterday. Nevertheless, forint loses were relatively modest, since the sell-off materialized rather through the bond market in Hungary.

Looking at the intra-day trading: the EUR/HUF pair just followed EUR/PLN gradually north. Although there were several important domestic fundamental news (the December CPI, fresh MinFin budget estimates or S&P comment on rating’s development), the key driver of yesterday price action was the EUR/PLN movements. So, EUR/HUF drifted lower through out the 250 zone and closed just below the 251.0 level.

Today’s price action will be again determined by market sentiment in the Polish FX market, where we expect no improvement. So the forint may suffer again due to political instability in Poland. Moreover, the market might already feel some negative side effects from market’s pre-positioning ahead of tomorrow’s 5Y and 10Y government bond auction.

(CSOB - Investment research)