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HUF: EURHUF Back Above 400 as Falling Fuel Prices Push Headline CPI Lower

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  • Hungary’s headline inflation reading came in below expectations at +3.0% Y/Y (Est: +3.1%), which has pushed EURHUF 0.3% higher this morning. Topside momentum for the cross has accelerated through 400.00, with resistance marked not far off this week’s highs at 402.45, the Mar 20 high.
  • However, much of the decline in the year-on-year reading can be attributed to the fall in fuel prices, and as such the disinflationary trend was not reflected in the core figure, which came in at +4.8% Y/Y compared to +4.6% in July.
  • While that was broadly in-line with sell-side estimates, the NBH flagged in the minutes of its September meetings that core is “likely to rise in the coming months, fluctuating around 5 percent during the rest of the year.” Meanwhile, the fall in the headline figure was projected, with CPI seen rising slightly above 4 percent by the end of 2024.
  • Still, the NBH noted in a flash analysis of the data that “The Bank’s measures of underlying inflation developments capturing persistent inflationary trends, calculated on a year-on-year basis, fell.”
  • The data will comfort NBH policymakers but will likely not be enough to warrant further easing, with recent central bank communication seeking to ease expectations of a continuation of rate cuts at the October meeting. The rally in EURHUF to and above 400.00 will be of particular concern to the central bank, while the US presidential elections and Middle East tensions have been cited as causes for caution.
  • Broadly, the NBH is seen delivering one more rate cut this year – most likely in December when an updated inflation projection will be provided. Fading bets of another large 50bp Fed cut also narrows the scope for more aggressive easing in Hungary, with HUF FRAs up close to 30bps compared to the end of last month.
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  • Hungary’s headline inflation reading came in below expectations at +3.0% Y/Y (Est: +3.1%), which has pushed EURHUF 0.3% higher this morning. Topside momentum for the cross has accelerated through 400.00, with resistance marked not far off this week’s highs at 402.45, the Mar 20 high.
  • However, much of the decline in the year-on-year reading can be attributed to the fall in fuel prices, and as such the disinflationary trend was not reflected in the core figure, which came in at +4.8% Y/Y compared to +4.6% in July.
  • While that was broadly in-line with sell-side estimates, the NBH flagged in the minutes of its September meetings that core is “likely to rise in the coming months, fluctuating around 5 percent during the rest of the year.” Meanwhile, the fall in the headline figure was projected, with CPI seen rising slightly above 4 percent by the end of 2024.
  • Still, the NBH noted in a flash analysis of the data that “The Bank’s measures of underlying inflation developments capturing persistent inflationary trends, calculated on a year-on-year basis, fell.”
  • The data will comfort NBH policymakers but will likely not be enough to warrant further easing, with recent central bank communication seeking to ease expectations of a continuation of rate cuts at the October meeting. The rally in EURHUF to and above 400.00 will be of particular concern to the central bank, while the US presidential elections and Middle East tensions have been cited as causes for caution.
  • Broadly, the NBH is seen delivering one more rate cut this year – most likely in December when an updated inflation projection will be provided. Fading bets of another large 50bp Fed cut also narrows the scope for more aggressive easing in Hungary, with HUF FRAs up close to 30bps compared to the end of last month.