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HUF keeps Weakening Amid Growing Inflation Risks

HUNGARY
  • Hungary's week-long opposition primary runoff commenced on Sunday, with voters choosing a candidate to challenge Prime Minister Viktor Orban in next year's parliamentary election (BBG).
  • It will be interesting to see if the NBH will also surprise the market on October 19 following the rise in inflation; even though CPI inflation came in as expected in September at 5.5%, it is standing way above the NBH 4-percent upper tolerance band.
  • The market is expecting the NBH to slow down the pace of its tightening cycle (with 15bps hike in the coming meetings); however, odds for a 30bps hike could increase amid rising concerns over stagflation risk.
  • HUF keeps weakening against major crosses in the past week; USDHUF keeps trending higher, trading at its highest level since November 2020 this morning. Next resistance to watch on the topside stands at 315.
  • Hungary 10Y yield has stabilized at around 3.50% in the past week after retracing higher in September (highest level since November 2018); next resistance to watch on the topside stands at 3.70%. On the downside, first support stand at 3.20%.

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