The Hungarian forint extended its loses on Wednesday as poor sentiment after a Slovak 50 bps rate hike prevailed. The negative development in the domestic bond market was not supportive either. Initially, the forint shrugged off both GDP and PMI figures as they didn’t alter the picture of the economy and hovered around the opening levels (EUR/HUF 253.45). In the afternoon, the EUR/HUF pair turned north as the currency to eased in step with domestic bonds. The EUR/HUF pair tested the 254.0 resistances just at the end of domestic trading, but the break failed.
There are two eye-catchers for the high-yielding front today. A 3Y government bond auction and the ECB meeting. Both events might impact the domestic bond market and so the front should mirror domestic bond prices. Should the auction prove successful, the front might feel some relief. Similarly, a not too hawkish ECB also might be of some help for the currency. Otherwise, the EUR/HUF is going to test the 254 levels again, with a successful test more likely than yesterday.
(CSOB - Investment research)