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Divergence Craters Between EURHUF and EURRUB

CEE
  • While EURRUB keeps trading close to a 7-year low, EURHUF has been constantly reaching new highs, breaking above its all-time-high of 404.80 this morning.
  • The forint has been extremely sensitive to the Russia/Ukraine conflict in addition to the rise in political risk due to the divergence with Europe since the start of the war.
  • The 185bps NBH hike last Tuesday was not enough to ease the selling pressure on the forint.
  • We have seen recently that investors have been questioning if the Ruble ‘recovery’ was ‘real’ or just an ‘illusion’ as some analysts are expecting up to 10%+ contraction in GDP in 2022 with Russia recently ‘defaulting’ on its foreign-currency debt.
  • Hence, as the Ruble is not a convertible currency anymore, which can attract arbitraging capital flows, the current level of EURRUB is likely to be ‘artificial’ and EURHUF may be a better proxy for EURRUB (along with Russia CDS, VIX…).

Source: Bloomberg/MNI

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  • While EURRUB keeps trading close to a 7-year low, EURHUF has been constantly reaching new highs, breaking above its all-time-high of 404.80 this morning.
  • The forint has been extremely sensitive to the Russia/Ukraine conflict in addition to the rise in political risk due to the divergence with Europe since the start of the war.
  • The 185bps NBH hike last Tuesday was not enough to ease the selling pressure on the forint.
  • We have seen recently that investors have been questioning if the Ruble ‘recovery’ was ‘real’ or just an ‘illusion’ as some analysts are expecting up to 10%+ contraction in GDP in 2022 with Russia recently ‘defaulting’ on its foreign-currency debt.
  • Hence, as the Ruble is not a convertible currency anymore, which can attract arbitraging capital flows, the current level of EURRUB is likely to be ‘artificial’ and EURHUF may be a better proxy for EURRUB (along with Russia CDS, VIX…).

Source: Bloomberg/MNI