The Hungarian forint firmed against the
euro and attacked 278 EUR/HUF level early
in the session on Tuesday. But late in the
session the forint lost ground and retreated
back to 279.3 EUR/HUF.
In the morning the forint shrugged off
comments of governor Járai concerning
fiscal policy of current government. Járai
said at the press conference that fiscal
measures recently approved by parliament
and signed by president are taking the
economy in the wrong direction. On the top
of that he claimed that it was time to finally
surrender the 2010 Euro entry target date as
it is obviously unrealistic.
Weakening of the forint later in the session
was caused mainly by publication of
Ecostat’s (research arm of Hungary’s
Central Statistical Office) monthly
macroeconomic outlook, which predicted
Hungary’s ESA 95 budget deficit at 10.2%
of GDP excluding effect of pension costs.
Interestingly, Finance Ministry and Ecostat
published its budget forecasts at the same
time. Whilst Finance Ministry holds its earlier
forecast with cash-flow based budget deficit
at 1 769 billion forints in 2006, Ecostat is
less optimistic. It sees cash-flow based
deficit around 2000 billion forints, which is
greater by around 1% of GDP than
calculations of Finance Ministry.
Today, the forint will closely watch US CPI, if
the figure indicates the end of monetary
tightening cycle in USA the forint might firm.
But we do not expect any significant gains
as crisis in Middle East still cause
uncertainty on emerging markets.
(CSOB - Investment research)