USD/HUF: Forint Drops after Hungarian PMI Falls

The US dollar is higher against the Hungarian forint on Monday morning in a rebound from the 1-week low reached on Friday. Soft Hungarian economic data weighed on the forint with the greenback generally firmer ahead of the release of US manufacturing data.

USD/HUF was higher by 149 pips (+0.49%) to 305.30 with a daily range of 303.62 to 305.6 as of 10am GMT. The currency pair is rallying off the lows reached on Friday which had taken it to the bottom of its 5-day price range.

USD/HUF – The US dollar down against the Hungarian forint last week

The US dollar fell -0.30% last week against the Hungarian forint after failing to cling onto multi-month highs near 307. There is extreme pessimism on the outlook for the forint, having hit a record low against the euro last week. It is possible that the forint could see an extended rebound, purely because of how far it has dropped in the past few weeks.

On Monday, producer prices rose 2.4% in Hungary when a rise of 2.1% was expected. Meanwhile the purchasing manager index for Hungary released by the Hungarian Association for Logisitcs, Procurement and Stockpiling fell to 52.5 from 53.9.

Overall the Hungarian economy is performing well, but today’s PMIs are in line with forecasts for a slowdown in the first half of 2020. At the same time prices are rising but there would appear to be little chance of change in monetary policy to combat the inflation. Last week the National Bank of Hungary kept interest rates unchanged and offered little guidance about the future.

The dollar

The Federal Reserve also chose to keep interest rates steady last week, but offered slightly move cautious guidance on the future path for rates. The Fed’s Chair Jerome Powell specifically talked about his concerns about low inflation. To combat low inflation a central bank would typically need to ease policy. This is a departure from the previous guidance from the Federal Reserve that the 2019 rate cuts were a “mid-cycle adjustment” which would suggest rates will eventually turn back higher.

Later today, the US ISM Manufacturing PMI is expected to rise to 48.5 from 47.2 previously, which was the lowest since June 2009.

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