EURHUF Trades Higher Again Following Disappointing Monday Data

The Hungarian Forint is currently the second worst performing currency on the day against others in CEEMEA, with EUR/HUF trading just under 399.00. HUF weakness has persisted from yesterday’s session which saw the cross touch 400.80 following disappointing industrial production for November and a spiralling trade deficit.

• Yesterday’s high fell just shy of the 20-day EMA, with initial resistance now at the 100-dma / 20-day EMA at 400.11 / 400.48. Local equities have extended the recent uptrend, with the Budapest Index trading 0.10% higher on the day. The Hungarian curve sits modestly steeper, with 10Y bond yields up 13.0bp and off yesterday’s month-long lows.
• CPI data is on the docket on Friday, where inflation is expected to rise slightly from 22.5% to 25.8% (+3.0% M/M), indicating prices have not yet peaked. It is unlikely that the NBH will hike the base rate at the meeting in two weeks after predicting in its December meeting that inflation won't begin its decline until Q2. However, it remains feasible that the deposit tender tools could be adjusted to rein in excess liquidity, with CPI in Hungary above that of most of its other CEEMEA peers.