The Hungarian forint retreated slightly yesterday as situation in core bond markets was calmer and domestic equities rebounded slightly. Moreover, as we expected members of the Monetary Council started to talk about the forint as NBH’s president Jarai gave its comments both Bloomberg and Reuters. Looking at the intra-day trading: the forint opened on a positive and drifted away from two-year lows recorded on Wednesday. Hence, the EUR/HUF dipped to the 256 territory reaching it intra-day low (256.57).
The Hungarian currency then gave up part of its gains as the domestic bond market in a reaction to the first Jarai’s comment yesterday. According to NBH’s president there were more signs, which point towards an increase in the NBH base rate. Jarai added that the economy operates near a state of heart attack. According to Jarrai everything is still functioning in the body, but deep down, problems are mounting and the size of the (public) deficit may deter investors. Few minutes latter, however, Jarai has downplayed the importance of the recent forint volatility as he said that the recent fluctuations are not very extreme. Importantly, NBH’s president consider the recent forint weakening as the regional (or rather global) factor, saying that you could not say where it (the weakening) would stop and how it would continue. These words might indicate that the NBH knows very well that the forint weakening might a part of global asset re-alocation, which will be very hard to fight with.
Today, while the market might briefly monitor the January foreign trade data (the released deficit – EUR 216m – was visibly higher than the market consensus), detail GDP figures and NBH Minutes from the last Monetary Council meeting, a release of the US payroll report will be definitely in focus. Hence, the market might to opt for a wait-and-see mode waiting for the release of the payrolls in the afternoon. The forint will then react in a same direction as bonds in core markets.
ČSOB - Investment research