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Yield curve shifts higher with 5s30s flattening


Austria lowers 2021 funding target


Trading Near Recent Highs


Early Trade Sees EUR/USD Edge Lower


Huge move lower for short sterling on the open

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  • This morning, economic data showed that unemployment rate rose to 4% in August (vs. 3.7% exp.), up from 3.9% the previous month.
  • In an economic conference last week, NBH Governor Gyorgy Matolcsy called the soaring inflation a 'public enemy', which has been a global phenomena since the start of the year.
  • Policymakers decided to slow down the pace of the NBH tightening cycle by hiking the policy rate by 15bps last Tuesday to 1.65% following three consecutive '30bps hikes'.
  • Unless inflation starts to surprise positively in the coming months (rising well above 5%), we expect the NBH to continue to increase its policy rate by 15bps at each of the next three meetings, which would lift up the policy rate to 2.1% by year end.
  • The slow down in the pace of hikes has been weighing on the HUF, which has experienced significant selling pressures in the past two weeks, decoupling from local peers (PLN and CZK).
  • The table shows that the HUF is one of the worst FX performers in September, down 3.7% against the USD.
  • Next economic data to watch will be average gross wages and PPI inflation coming out on Sep 29 and Sep 30, respectively.

Source: Bloomberg/MNI