The Hungarian forint extended its gains on
Tuesday thanks to a positive development in
core bond markets, which was coupled with
an ongoing recovery in the both domestic
bond and equity markets. Moreover, the
Hungarian unit also benefited from a pledge
made by Socialist Party president Istvan
Hiller, whose party obtained the biggest
number of parliamentary mandates in the
first round of the elections. Hiller stressed
that after the second round (held on April
23rd) one of the most important tasks (of a
new government) would be to rein in the
budget deficit. We, however, keep to be
skeptical to such promises because they
sound too general and the Socialists would
definitely want to win the local elections too,
which means that any fiscal tightening would
be very likely postponed to the next fiscal
year.
Nevertheless, a short-term outlook for the
forint brighten after Sunday’s vote and the
EUR/HUF has maintained its downward
trend. Hence, the pair managed to break
below the 265.0 level, which means that the
forint has gained more than one percent
against the euro since Monday’s opening.
Given the empty domestic calendar, the
forint focus on comments coming from a
domestic political scene as campaign ahead
of the second election round will intensify
and watch other markets (the Polish FX and
core bond) too. Moreover, since the highyielding
Icelandic crown hits fresh lows
yesterday evening, the forint could face
some negative spill-over effects and the
positive correction could come to the end
today.
(CSOB - Investment research)