USD/HUF: Hungarian Forint Slips Following Strong Gains

The Hungarian Forint strengthened against the US dollar in Monday. The US dollar Hungarian forint exchange rate declined 0.3% to close at 294.55. The US dollar is paring some losses versus the forint in early trade on Tuesday.

A lack of fresh threats from Iran or the US meant that the risk off mood eased in the previous session, knocking demand for the safe haven US dollar. The panic surrounding rising tensions in the Middle East has lessened and investors are reassessing the likelihood of a US – Iran war breaking out.

The dollar slipped lower despite better than forecast US service sector pmi data. Service sector pmi data showed that activity experienced moderate growth of 52.8 in December, up from November’s 51.6, whereby the figure 50 separates expansion from contraction. Delving deeper into the report, a solid rise in new orders suggests that the sector could continue its recovery following a slump across the summer months.

Today the US service sector remains in focus with the release of ISM non-manufacturing data. This is the most closely followed US service sector data point. Analysts expect growth of 54.5 in December, up from 53.9 in November. A strong reading could calm concerns of the manufacturing slump spilling over into the service sector, the dominant sector in the US. This could boost the dollar.

Will Hungarian Retail Sales Boost Forint?

The Hungarian forint was on the front foot at the start of the trading week following the release of Hungarian wage data. Salaries in Hungary, in both the public and private sectors, rose at a double-digit rate year on year in October. Average gross wages increased 11.6%, a slight slowdown compared to the September data but beating analysts’ forecasts. Looking ahead analysts believe that there could be a mild slow down in 2020 owing to an 8% increase in the minimum wage which is proving to be a sticking point for many employers.

Today is busy day on the Hungarian economic calendar. Investors will look towards the release of retail sales and unemployment data. Analysts are looking for retail sales to have increased 0.6% moth on month, hardly surprising given the 11.6% increase in wages. Meanwhile unemployment is expected to remain steady at 3.5%.

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