The Hungarian forint extended its looses on Thursday’s early trade as higher-than-expected US wage inflation deteriorated sentiment towards emerging markets. The forint felt in the morning to its lowest value of this week – 278.1 EUR/HUF. However improving sentiment towards emerging markets together with better than expected industrial production helped the Hungarian currency to recover. Forint’s recovery was probably influenced also by hawkish comments of NBH’s governor Zsigmond Járai, who said that monetary tightening should continue until 3% inflation target in 2008 is achievable.
The forint firmed more than other emerging market currencies and ended at 275.1 EUR/HUF. Forint outperforms the region Both today’s Hungarian statistics concerning trade deficit and final GDP surprised. The trade deficit reached EUR 327 million, which was above market’s as well as our estimates.
On the other hand GDP growth was revised upwards by 0.2% to 3.8% y/y in
second quarter of this year and adjusted for calendar effect the growth was 4.1%. These figures signalize that slowdown of Hungarian economy is not yet as big as preliminary figures indicated. We believe that in spite of worse trade deficit today’s statistic should be rather market positive, although due to yesterday’s sharp rebound of the forint we see only limited room for further firming of the Hungarian currency.
(CSOB - Investment research)