The Hungarian forint advanced versus the US dollar for a seventh straight session on Thursday. The US dollar Hungarian forint exchange rate declined 0.2% closing at 294.54 after hitting a low of 293.80, the strongest level for the forint since early November. The dollar is gaining ground in early trade on Friday.
The US dollar traded broadly higher versus its major peers on Thursday, although remained weaker versus the forint. The dollar has been under pressure across recent weeks as expectations grow of a US – China phase one trade deal being signed by 15th January. Strong indications that a first stage trade deal will be signed has improved the outlook for the global economy boosting risk sentiment, dragging on demand for the safe haven US dollar.
Today US dollar investors will switch attention back towards the US economic calendar. Investors will be watching US ISM manufacturing data in addition to the minute from the December Federal Reserve monetary policy meeting. Market participants will scrutinize the minutes closely for clues as to where the Fed are looking to take monetary policy after indefinitely pressing pause to the latest rate cutting cycle.
Hungarian Manufacturing PMI Impressed
The Hungarian forint gained ground after the Finance Minister Mihaly Varga announced new measures as part of an action plan to protect the Hungarian economy, alongside targeted tax cuts. The news measures will take effect in the new year and aim to support families and businesses. For example, tax on small business will be cut by 12% helping 45,000 Hungarian firms.
The Hungarian government managed to simultaneously reduce tax burden whilst increasing revenue this year. This additional money is being ploughed into the new measures.
Hungarian manufacturing PMI also helped boost the Hungarian forint. Manufacturing activity in the region expanded at 53.9 on the PMI index, ahead of the 53.1 in November. An index value of 50 separates expansion from contraction. The new orders sub index strengthened, and production volume also showed expansion. The employment component of the report fell under 50.
There is no high impacting data due to be released until Monday. Increased geopolitical risk following US airstrikes in Baghdad could drag on riskier currencies such as the forint.
