The US dollar forint exchange rate dropped to a five-week nadir of 293.93 in the previous week. The US dollar declined 1% versus the Hungarian forint across the week, extending losses of 1.4% from the week before. The dollar is on the back foot at the start of the new trading week.
At the end of last week, the US and China agreed a phase one trade deal. The US agreed to reduce tariffs to 7.5% on $150 billion worth of Chinese imports. However, tariffs remain at 25% on $250 billion worth of imports. China has agreed to substantially increase US agricultural purchases, although it did not specify by how much.
Risk sentiment increased following the deal, despite the agreements lack of detail, weighing on demand for the US dollar. Attention will now turn to phase two talks. Whilst Trump is keen to begin these immediately, China say that the next phase is dependent of the first phase being implemented.
The dollar declined across the previous week following a more dovish than expected Federal Reserve. As investors had broadly expected, the Fed kept monetary policy unchanged. However, Federal Chair Jerome Powell said that the central bank would need to see a significant and persistent increase inflation in order to hike interest rates. Investors interpreted that as the Fed being more inclined to cut interest rates as the next move, over lifting rates.
Investors will pay attention to Fed policy makers, due to give speeches across the coming days, in an attempt to gauge sentiment at the central bank.
On the data front, updates on US industrial production, housing, consumer sentiment and personal expenditure are all due this week.
Hungarian National Bank Rate Decision Moves Into Focus
The Hungarian forint firmed at the end of the previous week, along with other central and eastern European currencies, following Boris Johnson’s resounding election victory in the UK elections and the US – China phase one trade deal. Both events lifted investor sentiment making riskier currencies, such as the forint more attractive than the safe haven dollar.
Investors will now look ahead to the Hungarian National Bank’s interest rate decision tomorrow. Market participants are broadly expecting this to remain on hold.