The Hungarian forint resisted pressure from rising bond yields in core markets and extended its gains on Monday. The only domestic news, which could have had a positive impact on the forint, was a release of the March Purchasing Manager Index (PMI). The index came to 53.5 points in March, up from February's 51.2 points. Moreover, the breakdown of the PMI was even more encouraging than the headline figure, because the production, new orders and export sub indices pushed the aggregate index up. This means that the Hungarian economy enjoys a recovery in Western Europe and particularly exports are doing fine.
On the other hand a surge in purchasing price sub index may point to building price pressures, which are driven by weaker forint and higher commodity prices. Regarding trading: the EUR/HUF pair continued to fall from the opening (264.00) and during a session met the strong support at the 262.20 level. The pair then closed just above this level. Given the empty domestic calendar the forint should look for inspiration to other markets. We tend to think that a positive correction could be over now and the market may already start to eye Thursday’s ECB press conference, where risks will be skewed to the downside for CE currencies.
(CSOB - Investment research)