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Forward Rate Pricing In a 30bps Hike During The Summer

HUNGARY
  • As expected, the NBH decided to leave its 1W deposit rate unchanged at 0.75% at its weekly meeting yesterday as the strong HUF momentum is giving policymakers a 'breather'. In the end of March, the market was starting to speculate that the HUF weakness was going to 'push' NBH policymakers to start a tightening cycle earlier than expected, which could have weighted on the economic recovery following the difficult first quarter due to the worsening Covid situation.
  • Forward rates are currently pricing in a 30bps hike over the summer; there is a probability that the NBH starts hiking its benchmark (currently at 0.6%) at its next meeting on June 22, especially following Virag 'hawkish' comments last week.
  • The 10Y yield has been retracing slightly higher in the past few days after finding a local low at 2.84% and currently trades around 2.91%. Support to watch on the downside stands at 2.78% (50D SMA), followed by 2.75%. On the topside, key resistance remains at 3.22%.
  • USDHUF is up slightly this morning after testing the 285 level; ST resistance to watch on the topside stands at 290, followed by 295. On the downside, first support (below 283.50) stands at 280.

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