Watch out, someone will decide the fate of our investments again!
The year 2026 began with geopolitical tensions on the markets once again, with investors' moves primarily determined by the fate of Greenland. Last week, the possibility of a US-European trade war reemerged, but in the end, US President Donald Trump pulled the government aside at the last minute.
Knowing Trump, we cannot sit back and relax in the coming months, as tension has not disappeared from the markets, but has merely receded into the background for now. In addition to the situation in Greenland, developments in the Russian-Ukrainian war continue to determine decisions. For example, even though the Hungarian stock market is hitting historic highs, the hope of a possible ceasefire could give it a further boost, as the possibility of an agreement has not yet been priced in.
The same is true for the currency market: almost everything currently points to a weakening of the dollar, but the mood could quickly change if geopolitical tensions ease.
In the case of the forint, the high base rate of 6.5% continues to be the main support, but if the war in the neighboring country were to ease, it could give the Hungarian currency another boost, and another factor could come into play alongside the high interest rate.
In addition to geopolitics, investors are naturally paying close attention to important economic data and central bank decisions.
There is a good chance that these will come to the fore again this week, as there will be no shortage of events.
The first day of the week may be relatively quiet in this regard, as only the National Bank of Hungary's (MNB) third-quarter housing price index for last year will be released on Monday. Of course, this could also be exciting, as it will already include the initial effects of the Home Start program launched in early September, so finally, not only estimates but also concrete data will be available on the impact of the subsidized loan program on the real estate market.
From a Hungarian perspective, Tuesday will clearly be dominated by the central bank's interest rate decision. In December, the Monetary Council caused a minor surprise by abandoning its previous hawkish tone and instead preparing the market for a possible reduction in the 6.5% base rate. From now on, decisions will be made from meeting to meeting, primarily based on the inflation outlook. This could mean an interest rate cut as early as Tuesday, but December's 3.3% inflation and the global market tensions of recent weeks are almost certain to hold the MNB back from easing. Most experts expect policymakers to wait for at least the January inflation data to see the extent of price adjustments at the beginning of the year, and then, if international risk-taking also develops favorably, the first 25-basis-point cut could come. At the same time, the foreign exchange market is expected to pay close attention to the central bank's communication following Tuesday's meeting to see if there are any stronger hints of an upcoming easing than there were in December.
From a market perspective, the Fed's decision on Wednesday evening may be even more important than that of the Hungarian central bank. We mentioned that almost everything is currently working against the dollar, and the current interest rate decision is not expected to change this, but investors may pay close attention to the communication. This is especially true given that Jerome Powell's term as chairman expires in May, and according to reports, the US president may name his nominee for the position this week. There has been tension in the market in recent months over the possibility that the new central bank leadership may embark on more aggressive interest rate cuts and that political pressure on the Fed from Trump may intensify.
The second half of the week is likely to be dominated by macroeconomic data, with the Hungarian Central Statistical Office (KSH) publishing its December foreign trade statistics on Thursday morning. In the afternoon, the US will release its weekly unemployment figures and factory orders data.
Friday could be another important day, as preliminary GDP data for the fourth quarter will be released. For us, Hungarian statistics will naturally be the most important, but statistics will also be coming in from Western Europe. In addition, Germany will publish its preliminary inflation data for January, while investors in the US will be watching producer prices.
Cover photo (for illustration purposes only): Portfolio
