Forint Underperforms Amid Growing Signs of Poor Economic Performance in Q4

EURHUF has reversed yesterday’s losses as weaker-than-expected industrial production data weighs on the local currency. Industrial production fell for the 11th consecutive month, shrinking 5.6% y/y in November (Est: -1.2%) compared to a 2.9% drop in October, raising concerns over the pace of recovery of the economy. The disappointing data follows a 5.4% y/y decline in retail sales in November and adds to the increasingly gloomy prospects for the Hungarian economy in Q4-2023. Today, the HUF has been underperforming compared to its regional peers (PLNHUF: +0.32%; CZKHUF: +0.08%).

• Despite today’s gains, EURHUF still remains within relatively close proximity of its recent lows. Key support has been exposed at 375.62, the Nov 14 low, while initial resistance is at 381.14, the 50-day EMA.
• Looking ahead, CPI data on Jan 12 is the next key release. Analysts see headline inflation declining from +7.9% y/y in November to +5.9% in December. The continuation of favourable inflation developments will likely facilitate the 75bp base rate cut pace to be maintained by the next NBH at its next meeting on Jan 30.