During limited trading on European markets the Hungarian forint managed to firm bellow the 260.0 level and set the new 9-week high (258.75) on Monday. Once again no domestic news were involved and the bullish trend has been a result of promising voices on the domestic political front and better sentiment in emerging markets, which was driven by the USD weakness. Interestingly, today’s press Nepszabadsag reported that the government plans to list motorway companies on the BSE to ensure that motorway costs will be treated as off budget items under PPP financing.
This could an elegant solution of the methodical dispute with the Eurostat over motorway financing. We should hear more about this proposal later today as Economy Minister Janos Koka would speak about motorway financing. Anyway, the domestic eco calendar is quite rich today, including the March industrial production data and closely watched April’s public budget data.
The industrial output grew 1.5% m/m, which confirms our view that exports are doing well thanks to firming demand in Western Europe. The budget figures might be more interesting, though our estimate do not deviate from the MinFin’s projection (HUF 948 bn). Nevertheless the budget gap will be huge anyway (the cumulative deficit should reach more than 60 % of the full year target, which stands at 6.6% of GDP – on cash-flow basis), so any upside surprise could hurt the current positive sentiment.
(CSOB - Investment research)