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HUF Keeps Weakening Despite NBH Hike

HUNGARY
  • The NBH hiked its 1W depo rate by 50bps to 5.85% yesterday to ease the selling pressure on HUF after last week’s dramatic depreciation.
  • Even though the central bank was supposed to reduce the frequency of hikes in the 1W depo rate to monthly steps, policymakers mentioned on several occasion that the NBH will not hesitate to intervene via the 1W depo facility if HUF weakens dramatically.
  • Consensus was expecting a 65bps hike; however, the slight ‘improvement’ in the Russia/Ukraine conflict following Zelensky comment on NATO led to a sharp retracement in CEE currencies this week and therefore ‘ease’ the pressure on NBH policymakers to hike too aggressively.
  • EURHUF has been retracing higher in the past two days after finding a local low at 376.60 yesterday; the pair is now trading back above the 380 level.
    • Resistance to watch on the topside stands at 383.10.
    • On the downside, key support remains at 370.

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