USD/HUF: Hungarian Forint Rallies On Strong Inflation & Risk Appetite

The Hungarian forint, in a rare show of strength, advanced versus the US dollar on Monday. The US dollar Hungarian forint exchange rate dipped 0.2%, snapping a four-session winning run for the pair. The forint is strengthening again in early trade on Tuesday.

The safe haven US dollar slipped lower across the board on Monday amid increased risk sentiment ahead of the signing of the US – China trade deal, due to take place on Wednesday. After over 18 months of wrangling the US and China will sign the deal which was agreed in December.

Risk sentiment has also been given a helping hand from solid Chinese import and export data, which is keeping the pressure on the US dollar in early trade on Tuesday. Both import and export data best analysts’ expectations calming fears over the ongoing impact that the trade dispute had had on the Chinese economy.

Today, attention will now switch back to the US economic calendar. US inflation data could offer support to the greenback. Analysts are expecting US inflation to increase 0.3% month on month in December, and 2.4% year on year. This would be a significant jump from 2.1% annually reported in November and would be well above the Fed’s 2% target.

The Federal Reserve have indicated that they are keeping monetary policy on hold. The central bank has said that it would need to see a significant and persistent uptick in inflation to consider a rate hike. A strong lift in inflation could boost rate cut expectations and lift the US dollar.

Inflation Beats Forecasts

The forint was advanced versus the US dollar on improved risk appetite across the financial markets. With US agreeing to remove the currency manipulator tag from China, relations between the two powers have clearly improved which is boosting risk appetite and demand for riskier currencies such as the forint.

Inflation data is also lifting the forint on Tuesday. Consumer prices in Hungary rose in December to 4% year on year, up from 3.4% in November. Analyst had been expecting a reading of 3.9%. The National Bank of Hungary are unlikely to consider hiking interest rates as policy makers have indicated that rates will remain at low levels for the foreseeable future.

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