After a hectic week, investments and the fate of the forint may hinge on a single decision
Last week, US stock markets were characterised by strong volatility: news of the end of the US government shutdown brought a rally, but pessimistic expectations surrounding the Federal Reserve's next interest rate decision dragged the indices down. The volatility was primarily due to fluctuations in the technology sector and rapid repricing of Fed interest rate expectations.
In the first half of the week, a sharp sell-off swept through the leading indices: on Thursday, the Nasdaq fell more than 2%, the Dow lost nearly 800 points, and it was the worst trading day since October 10. Investor sentiment was dampened by the market pricing in less and less chance of an interest rate cut in December — the 95% probability at the beginning of the month has now slipped below 50%.
This indicated investors' concern that the Fed might not ease further if inflation does not cool sufficiently.
However, there was a slight turnaround at the end of the week. On Friday, the Nasdaq closed with a 0.13% gain, breaking a three-day losing streak. Although the indices were down significantly during the day—the Nasdaq recovered from a nearly 2% drop—they managed to stabilize, led by technology stocks. Nvidia, Oracle, Palantir, and Tesla all corrected after the previous day's sharp decline.
However, the macroeconomic backdrop remains uncertain. Although the more than six-week US government shutdown has ended, it has not particularly reassured the market.
The White House announced on Friday that certain economic data may not be published due to the shutdown, raising new questions about the economic outlook. Investors therefore continue to focus primarily on Fed communications and inflation data.
The EURUSD gradually strengthened during the week, mainly due to the shift in US interest rate expectations. The previous week started at around 1.1550, then rose in several waves to close to 1.1650.
The USD weakened as the market became less convinced of a rapid interest rate cut at the end of the year, while the EUR was also supported by minor technical corrections.
In the second half of the week, the momentum slowed slightly, but the exchange rate remained close to its weekly highs.
Last week, the forint traded in a range of 383–386 against the euro, correcting slightly upwards overall. The forint was even stronger at the beginning of the week, but weakened several times above 385, mainly after Minister of National Economy Márton Nagy announced that the government would raise the deficit target, and then we saw a forint correction in the second half of the week as well. Volatility was relatively high, but no lasting trend emerged, with the movement tending to be sideways.
The USDHUF fell slightly in line with the weakening of the dollar, remaining mostly in the 329.5–331.5 range. The middle of the week saw the most significant strengthening of the forint, when the exchange rate dipped below 330, but there was no lasting breakthrough. By the end of the week, the dollar had corrected slightly, but remained weaker than at the beginning of the week.
The MNB may decide the fate of the forint
We will be watching several important macroeconomic data releases this week, which could determine the direction of the stock markets and the forint.
The week started early on Monday with Japanese industrial production data, which will provide an overview of September's developments, followed by the October value of the US New York manufacturing index in the afternoon. The first day of the week thus began with important Asian signals in the morning, while in the afternoon, the leading sentiment indicator for the US manufacturing industry will determine the focus of the markets.
Early Tuesday morning, several important data releases are scheduled in Hungary: the Hungarian Central Statistical Office (KSH) will publish September earnings statistics, while the MNB will publish October international reserves and the financial accounts of households and the government. In the second half of the day, the most important event for the market will be the MNB's interest rate decision for November. On the international front, the German ZEW sentiment index will be released in the morning, followed by US industrial production and capacity utilization figures for October in the afternoon. Tuesday will thus bring a steady stream of new data on economic activity.
Early Wednesday morning, Japanese foreign trade statistics and September private sector machinery orders will be released, providing a more detailed picture of the state of the Asian economy. The highlight of the day will be the minutes of the US Federal Reserve's October meetings, which investors will be looking to for subtle hints about interest rates and inflation expectations.
On Thursday morning, German producer prices for October will kick off the day, followed by fresh unemployment claims statistics from the United States in the afternoon, as well as the Philadelphia Fed's November index. Later in the day, the euro area's consumer confidence indicator for November will be released, allowing for a comprehensive assessment of producer prices, the labor market, and consumer sentiment on Thursday.
Early Friday morning, Japan's manufacturing purchasing managers' index for November will be released, followed by German and then eurozone PMI data in European time. Meanwhile, in Hungary, the KSH will publish its third-quarter investment statistics. The week will close in the afternoon with the release of the preliminary US PMI for November and the University of Michigan Consumer Sentiment Index, bringing the macroeconomic week to a close with a combined assessment of global business and consumer sentiment.
Cover photo (for illustration purposes only): Getty Images
