The sentiment on the Hungarian FX market remained positive after Wednesday’s
dovish comments of U.S. Federal Reserve Chairman Ben Bernanke. The forint was
further supported by unexpectedly robust demand at 5Y and 10Y government bond
auctions (for more details see Hungarian bonds), however the gains of the Hungarian
currency were, as we expected, limited. It is worth mentioning that the forint shrugged
off all domestic news from the political front. The forint did not react on the revision of
finance ministry’s forecast regarding the budget deficit, since this revision referred to
the first quarter and was rather marginal (1Q budget deficit is to reach HUF 825.7 billion,
compared to earlier prediction of HUF 894.9 bn) and in addition the full-year
deficit forecast remained unchanged. The publication of target dates for the main
structural reforms regarding health care, social security and educational system
planned in 2007 had no impact on the Hungarian FX market.
Today the domestic economic calendar is empty. We believe that the regional sentiment
should remain positive due to falling yields on core markets. Nevertheless we
reiterate our view, that we consider current levels of the forint very strong, thus
we do not expect further significant gains.