The Hungarian forint gave up part of its recent gains yesterday as yields in core bond markets turned north again, which has made life of high yielding currencies tougher (see for instance the Icelandic crown’s slide). Hence as a result the EUR/HUF pair bounced back above the 265.0 level.
As concerns news from the hot political front, a split of the right-wing parties seems to be even wider after yesterday. Even though leader of Hungary’s main right-wing party, Orban, had offered to step down as PM candidate in favour of a former NBH’s governor Peter Akos Bod, who is closely related to the small conservative Democratic Forum, the latter party refused to make an alliance with Fidesz ahead of the second run of the elections. It means that chances the current center-left coalition of the Socialist and Free democrats to stay in power have risen significantly. Let just repeat here again, we would consider such an outcome of the lection as the most market-friendly scenario.
Today, the key domestic event is a 5Y and 10Y government bond auction. Though it could grab some forint’s attention, we do not think that it will drive the market because there was not a heavy pre-positioning ahead of the auction. Sentiment in emerging markets’ universe might be more decisive for today’s price action.
(CSOB - Investment research)