USD/HUF: Will Inflation Data Lift Hungarian Forint?

The US dollar Hungarian Forint exchange rate advanced in the previous session. The exchange rate closed on Monday 0.17% higher at 299.74. The pair remains steady at this level in early trade on Tuesday.

The US dollar traded within a familiar range at the start of the week amid a lack of relevant economic data and amid the ongoing trade tensions between the US and China. Trade headlines are mixed and there are no clear signs over whether a phase one deal will be reached soon or not. For now, investors are focusing on the 15^th December tariff increase deadline.

With no high impacting economic data due today, the US dollar could drift through the session as investors look ahead to the Federal Reserve monetary policy announcement on Wednesday. Following three rate cuts across the year, market participants are expecting the Fed to keep rates on hold. Policy makers have indicated that that they believe that they have done enough to stabilise the economy for the time being. With no move expected on the interest rate front, investors will pay plenty of attention to the press conference and the dot plot, the path of future interest rate decisions. Currently the dot plot suggests that the next move by the Fed will be a rate hike in 2021.

Inflation data ahead of December’s Central Bank Meeting

The Hungarian forint slipped versus the dollar in the previous session despite encouraging signals from the Hungarian economy. Data showed that year to date, the government deficit was 77% of the full year target in November. Owing to rising tax revenues, a tight labour market and incoming EU transfers, the Hungarian government has plenty of room to spend in the final month of the year, without breaching the 1.8% deficit to GDP target. The deficit is also markedly lower than last years, although it has also been rising strongly over the past 3 months.

Today investors will look to Hungarian inflation report. Analysts expect inflation to increase 3.3% in November, whilst core inflation is expected to remain at 4%, the top of the Hungarian bank’s 2% – 4% range. The National Bank of Hungary will hold its monetary policy meeting on December 17^th, here it will also give its quarterly inflation report. The central bank has indicated its intentions to keep monetary policy accommodative which could keep the pressure on the Hungarian forint.

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