Yesterday, the Hungarian forint was again the biggest loser in Central Europe as it plummeted by 1% in parity with the euro. Tuesday’s session just confirmed that the market sentiment remains very poor in the Hungarian FX market. As yesterday trading showed the vulnerable Hungarian currency simply picks all bad news circulating within the region and continues to ease.
Hence, looking at the intra-day development: the forint started the session on a weak footing as it tracked the easing Polish zloty. The situation temporary stabilized around the noon as the EUR/HUF began to move sideways around the 264.0 level. However rising bond yields in the U.S. and falling Icelandic crown brought back the downward pressure. Thus, EUR/HU closed at the 264.65.
Today, we might expect another volatile session. EUR/HUF should track bond yields in core markets, while political jitters in Poland may worsen the forint position. Should bond yields in core markets continue to rise EUR/HUF would probably test the recently set two-year high standing at 266.85. A successful break of this barrier would probably open to the 270 area.
ČSOB Investment Research