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Will The NBH Also Surprise Positively on Thursday (Jan 27)?

HUNGARY
  • The NBH decided to surprise market with a 50bps hike in today's meeting, levitating the 'core' policy rate to 2.9%(consensus was expecting a 30bps hike).
  • The NBH also raised the ceiling on its interest-rate corridor to 4.9% from 4.4%, to leave some room for further tightening via the weekly deposit rate.
  • Majority of sell-side analysts also expect a 30bps hike in the 1W depo rate ('effective' policy rate) on Thursday (Jan 27).
  • However, the renewed weakness in HUF due to global risk-off environment puts NBH policymakers in a difficult position; a weakening forint keeps supporting inflation expectations.
  • EURHUF is slightly down following the decision, currently trading below the 360 level; next support to watch on the downside stands at 357.60 (200DMA). ST resistance to watch on the topside stands at 361.60 (100DMA), followed by 364.40 (50DMA).
  • Further HUF depreciation in the ST could 'push' policymakers to hike more than expected on Thursday.
  • Statement and press conference to follow at 2pm (London time).
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