The Hungarian forint yesterday followed
the zloty to stronger values, but did not
break through the technical barrier at 270
EUR/HUF and soon returned back to weaker
values. One reason behind the fact that the
forint corrected back was the statement of
European Monetary Affairs Commissioner
Joaquin Almunia who said that if Hungary
does not implement its fiscal austerity
measure rigorously Hungary risks losing
cohesion funds. The foreign trade statistics
showed a narrowing of the deficit, but
broadly in line with market expectations and
therefore couldn’t move the market.
It is worth mentioning that Eurogroup
(European Union finance ministers)
approved Hungary’s fiscal austerity
programme and thus gave Hungary more
time to cut its budget deficit until the end of
2009. Nevertheless ministers stressed that
reforms must be implemented strictly and
urged Hungary to start swiftly also with
structural reforms of public administration,
healthcare and pension and education
systems. Concerning the education system
the first step was done already yesterday,
when parliament passed in its final reading
the legislation on introducing highereducation
tuition fees.
EUR/HUF testing key support level
Today, the most important domestic event
will be release of September’s consumer
inflation. We believe that due to VAT as well
as excise tax on alcohol and cigarettes
increase CPI rose to 4.9% y/y, which is
slightly below market consensus. However
the market already priced in acceleration of
inflation thus it should have only minor
impact. The forint thus will follow the region.
With respect to the fact that the forint
yesterday afternoon broke offshore through
technical barrier 270 EUR/HUF it might
strengthen further. On the other hand the
Hungarian currency recently firmed
already sharply, thus we tend to believe
that the forint rather correct back above
270 EUR/HUF level, but the technical
picture warrants our full attention and a
confirmation of the break would be highly
relevant.
(CSOB - Investment research)