USD/HUF: Hungarian Forint Declines Amid Elevated US – Iran Tensions

The Hungarian Forint weakened versus the US dollar. The forint declined 1% across the session on Tuesday closing at 297.52. The forint is extending those losses in early trade on Wednesday.

The US dollar rallied verses its peers on Tuesday amid increased tensions between US and Iran. Overnight Iran fulfilled its pledge to retaliate attacking the second largest US base in Iraq with missiles. The White House has said that it will do take all necessary action to protect its personnel, partners and allies in the region. There were no casualties.  Trump will make a speech today.

The dollar was also supported in the previous session by stronger fundamentals. US ISM non-manufacturing pmi printed at a better than expected 55 in December. Analysts had forecast a reading of 54.5. The figure 50 separates expansion from contraction. The data was in sharp contrast to manufacturing ism reading last week which had tumbled deep into contraction.

Today investors will continue watching developments in the Middle East. Attention will also turn towards the US ADP private payroll report. Analysts are expecting 160,000 private jobs to have been created in December. This would be well ahead of the 67,000 created in November. Investors are particularly interested in the ADP report because of its strong correlation with non-farm payrolls, the most closely watched US macro-economic data release.

Forint Slipped Despite Strong Labour Market & Retail Sales Data

The Hungarian forint was on the back foot despite strong economic data. The unemployment rate came in as expected at 3.5%. This is only a 0.1% improvement from a year ago meaning that the unemployment rate has been stagnant around record lows as the labour market remains tight. Analysts are not expecting this rate of unemployment to change much in 2020.

Thanks to low levels of unemployment household finances are in good shape and consumers are not afraid to spend money. As a result, retail sales jumped an impressive 7.3% year on year in November. This wasn’t a one off either. October was also a good month for the retail sector. As a result, economic growth for the final quarter should be strong, supporting the Hungarian forint.

Today is another busy day on the Hungarian economic calendar with industrial production and balance of trade data due. However, developments in the Middle East could play a bigger role by directing risk sentiment.

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