Hungarian forint firmed a touch yesterday as surging domestic equity and bond market together with the strong Polish zloty supported the Hungarian unit. Moreover, the lower-than-expected November foreign trade deficit boosted the market sentiment. Hence, the EUR/HUF dipped below the 250.0 support already in early trading. However, the pair was not allowed to fall deeper in the 249 zone and its intra-day low stood at 249.65.
Interestingly, the forint completely shrugged off a negative news coming from the European Commission. Reuters published parts of a draft paper obtained from the Commission, which says that on Wednesday the EU will set a September 1st deadline for Hungary to upgrade its plan with concrete details of how it will cut its deficit (to make it consistent the government target to cut the deficit below 3% of GDP in 2008). The Commission, however, will refrain from suggesting any financial sanctions against Hungary (e.g. to cut transfers from cohesion funds). It is worth adding that EU finance ministers (ECOFIN) will have the final say on the draft recommendations.
Today, the domestic eco calendar contains the November release of industrial output data, but this is not a market mover. The experience from recent days suggests that EUR/HUF does not to move away from the 250.0 even though related markets face significant volatility. Thus we bet the pair will hover around its favour level today too.
(CSOB - Investment research)