The Hungarian forint extended its rebound thanks to a positive turn in core bond markets, which supported all high-yielding emerging markets’ currencies. Moreover, there were two other positive news: a 5Y and 10Y government bond auction was successfully subscribed and the pre-election opinion poll showed that the current ruling coalition (socialists and Free Democrats) may stay in power after the April election, which would be the most market-friendly outcome of the vote. the EUR/HUF pair opened at 261.75 and dropped in two big steps. First, the forint firmed strongly in early trading as it tracked the domestic bond market, which began the session in positive territory. The second big fall of the EUR/HUF pair came in the afternoon, when the core bond market reacted positively on a release of the favourable US inflation data. Hence, as a result the pair was able to close below the 260 level.
While the domestic calendar is empty today, the FX market should completely focus on a development in core bond markets, which has become less bearish recently and this might support the forint further.
(CSOB - Investment research)