The Hungarian forint reached on Thursday two-week maximum (274.15 EUR/HUF) in the morning while remained relatively strong until the ECB press conference. The forint shrugged off the information about government’s approval of the final version of convergence programme but comments from ECB governor Jean-Claude Trichet had a negative impact on the Hungarian currency. The negative mood was intensified by critical comments of Hungary’s central bankers. Governor Járai, who is known for his negative stance towards fiscal discipline of the Socialist-led government, said yesterday, that fiscal measures proposed in the programme were not adequate to cut deficit beyond 2008. Moreover, another central bank rate-setter Bela Kadar warned that further austerity measures would be needed and there would be little will to apply them in the election year 2010. The forint consequently eased and ended the session at 277.32 EUR/HUF.
Today, Hungary is obliged to submit revised version of the convergence programme to European Commission. Since the most important numbers has been published and the Brussels’s statement is unlikely to be available before end of September or early October, it should come largely as market neutral. The forint will thus wait for US payrolls, which should confirm slowdown of US economy. Although payrolls might support forint we believe that negative sentiment after yesterday’s central bankers’ criticism will persist.
(CSOB - Investment research)