The positive mood on the Hungarian market
sustained on Thursday but the main reason
behind the sharp firming of the forint late in
the afternoon were again knock-out barrier
options, which terminated as the currency
pair EUR/HUF broke through new technical
barriers. The forint reached the new 4-month
high at 264.30 EUR/HUF. It is worth
mentioning that the opposition is continuing
with demonstrations, which are attracting
only limited number of opposition supporters
(around 20 000 people). Yesterday József
Szájer from Fidesz told demonstrates that
Fidesz decided to sue Prime Minister
Gyurcsány for failing to disclose true
information about the state of the economy
prior to the April general election. At the
same time the magnitude of demonstrations
indicates that the political situation may calm
down very soon.
Regardless the opposition protests ruling
coalition is working on structural reforms.
Yesterday internet server Index.hu
uncovered health care policy document,
which seems very ambitious. It contains
reducing number of hospitals from 155 to
120 with half of them to be converted to the
companies. The document also suggest
introduction of private accounts in social
security. Although markets ignored this
information, if the government is strong
enough to implement rigorously proposed
reforms it might help Hungary to restore
investors' confidence.
Today the economic calendar is virtually
blank, since final industrial output will barely
have any influence. After yesterday's firming,
which was not due to macroeconomic
fundamentals neither due to calming political
situation but rather it was caused by options
play we do not believe that the forint might
extend its gains significantly. On the top of
that in the afternoon markets will watch US
statistics (retail sales and Michigan
consumer sentiment), which if surprise by
better numbers might have negative
influence on the whole Central European
region. It is essential to mention that the
risk of rapid change in positive trend at
Hungarian FX market persists, since the
rating agency Moody's might downgrade
Hungary very soon, which would have
unambiguously very negative effect on the
Hungarian currency.
(CSOB - Investment research)