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Selling Pressure On HUF Remains Elevated

  • Last week, the NBH 'disappointed' the market by keeping the slower pace of its tightening cycle, raising the benchmark rate by 15bps to 1.80%.
  • Selling pressure on HUF has remained elevated, with the forint recently trading at multi-month lows against major crosses (i.e. EUR, USD, GBP).
  • The forint has been one of weakest FX performers among the EM world in recent weeks, down 6.5% against the USD and 4.8% against the EUR, respectively, since the beginning of September.
  • A weak HUF would support inflation expectations in the medium term, which NBH Governor Gyorgy Matolcsy called a 'public enemy'.
  • EURHUF is now trading above the 366 level and gradually approaching its key resistance at 370 (see chart). A break above that level could lead to more aggressive hikes in the coming meetings.
  • We previously saw that the significant 20% increase in minimum wage combined with a potential hike in public sector wages next year could lead to a slower convergence of inflation down to the 3-percent NBH target within the next 12 months.

Source: Bloomberg/MNI

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