Market holidays in most of Western Europe, successful bond auction and rebound of US equities helped the Hungarian forint to firm yesterday. Although the EUR/HUF was initially moving in a sideways mode, the Hungarian unit began to strengthen after releases of the US macro data (GDP, deflator), which pushed US yields lower. So, the EUR/HUF fell from its intra-day high 262.62 to the 261 zone right after the closing.
Interestingly, the market was little influenced by comments made by a dovish member of the Monetary Council, Peter Bihary, who expressed his view that he did not expect the market would be shocked if the official target for the EMU entry (2010) was postponed. We are no sure about that even though analysts’ consensus on Reuters already points to 2014 as a realistic date for the euro adoption in Hungary. In our view, better sentiment on core equity markets plus relatively stable yields in the euro-zone should provide support for the forint even today. Hence, the EUR/HUF pair marsh further south to the 260.0 support.