Level 380 is very close
For the time being, the forint is losing momentum after the strengthening of the past few days, by 10 am the exchange rate is approaching the level of 380 again against the euro, which seemed to be an important resistance until now, but on Monday the forint was able to stay below it for a long time.
Development of the EUR/HUF exchange rate
The weakening of the euro against the dollar also plays a role in all of this: the common European currency was dragged down by the fact that two large EU economies, Spain and France, reported accelerating inflation again. All this strengthens the expectation that the European Central Bank will also continue the tightening. The intraday weakening against the dollar is already almost 0.2 percent.
Development of the EUR/USD exchange rate
The euro is below 380, all eyes are on the MNB
In a relatively favorable international market environment, in addition to the one-day central bank deposit still advertised at 18%, the forint remains very attractive among market participants, this helps in the fact that it has reached stronger and stronger levels in recent weeks, which the central bank has it is also an important factor for reducing inflation. In addition to all of this, the forint was temporarily below 377 against the euro yesterday afternoon, i.e. it reached a new ten-month high, although this morning the Hungarian currency weakened to around 379.
After the unsuccessful government securities market auctions of the last few weeks, this morning’s usual three-month discount treasury bill sale can also be exciting. It is quite possible that the auction will fail again, as the MNB’s discount bond will suck the demand out of the market. However, this will not be the most important event of the day, as the Monetary Council will meet and publish its decision in the early afternoon. Even now, it is almost certain that the interest rate conditions will not change (13% official base rate, 18% effective interest through the one-day deposit rate, although it is officially decided by the MNB board, not the Monetary Council), the main question will be whether the central bank will change its communication after the positive developments of recent months. According to analysts’ expectations, the reduction of the 18% effective interest rate may be discussed at the end of March at the earliest, but it is conceivable that the MNB will already start preparing the market for this, i.e. they will refer to it in the announcement or in any background discussion.
Against the dollar, the forint only reached a two-day high of around 356 yesterday, as the exchange rate was around 351 a few days before.
Yesterday, Prime Minister Viktor Orbán said in parliament that a permanent drop in inflation is necessary to introduce price caps, so this is not expected in principle before mid-May, and the MNB must take this into account when determining the interest rate policy.
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