Thursday’s inflation in Hungary surprised slightly to the upside with a rise from 3.7% to 4.1%, surpassing the National Bank of Hungary’s forecast of 3.8% year-on-year, according to ING’s FX strategist Frantisek Taborsky.
Market Expectations and Rate Cuts
Taborsky notes, “Given the rally we have seen in previous weeks in the HUF rates market, it is not so surprising that the market has started to reprice the current dovish expectations of central bank rate cuts. Still, the market is pricing in at least three cuts or even a little more than that with a chance we could see some movement this month.”
However, he also adds, “Our economists say the inflation numbers do not strongly point to a rate cut in August and see room for only two more reductions this year. While we believe the market will stay on the dovish side of market pricing, there is some room for profit-taking and repricing up. HUF is thus getting some boost for gains after two weeks of depreciation.”
Taborsky further predicts, “Yesterday, we saw EUR/HUF already moving lower, the most within the CEE region, and we expect more today below 396 and possibly more if rates remain paid.”
Analysis and Implications
The unexpected rise in Hungary’s inflation could potentially impact investors and the financial market in various ways. With the market reevaluating expectations of central bank rate cuts, there may be opportunities for profit-taking and repricing. Investors should stay informed about the evolving situation and consider adjusting their strategies accordingly to capitalize on potential gains.
Overall, the inflation data highlights the importance of staying vigilant and adaptable in the ever-changing landscape of the financial market. By staying informed and making informed decisions, investors can navigate potential challenges and seize opportunities for growth.