Economy 26 July 2018, 9:22am

Hungary forint at 1w high, approaching key line

Portfolio

Hungary’s forint starts the day at around 325 versus the euro on Thursday, slightly firmer than its closing level on Wednesday. Turkey’s lira depreciated against the euro already, while EUR/USD is flat.

HUF at 1w high, approaching key line - 09:22

After a steady start slightly over 325 versus the euro, Hungary’s forint firmed to a one-week high of 324.8, while sell-off of the Turkish lira accelerated over the central bank not raising rates as expected on Tuesday. The forint’s appreciation possibly have to do with the deal forged between U.S. President Donald Trump and European Commission President Jean-Claude Juncker.

Trump told a press conference in the White House rose garden, standing alongside Juncker, that they agreed “to work together toward zero tariffs, zero non-tariff barriers and zero subsidies on non-auto industrial goods." They added that they would “resolve" the steel and aluminium tariffs imposed by the U.S. which started the dispute. Apparently, the import tariff on EU cars will not be raised by the U.S., which is great news also for Hungary for the move would have placed great pressure on its economy. The forint firmed to 276.8 to the USD.

The HUF is approaching a point (see the trend line drawn) that could stop its march and if it manages to breach it southbound, it could make major progress in firming.

HUF climbs back to 325 vs. euro - Which way forward? - 08:34

The forint kicked off Thursday’s session around 325 to the euro, 0.1% firmer than yesterday’s closing level. Volatility appears to be greater than usual, but there’s no clear direction yet. The forint has edged towards stronger levels over the last few days; it was quoted north of 327 at the start of the week. The HUF is currently quoted at 277 against the USD and slightly below 366 versus the British pound.

As for the forint’s regional peers, Poland’s zloty and the Czech koruna both appreciated some today, while on emerging markets, Turkey’s lira eased by about 1% to the USD, and South Africa’s rand also weakened slightly.

The euro gained moderately against the USD today to around 1.1738. The market is waiting for the outcome of the ECB’s policy meeting in the second half of the day and the subsequent press conference by ECB President Mario Draghi that could both have an impact on EUR/USD.