The Hungarian forint slumped over 1.6% versus the dollar across the previous week. The US dollar forint exchange rate rallied to a fresh all time high of 309.85 on Friday amid strong USA data and ongoing coronavirus fears.
The forint is consolidating those losses in early trade on Monday as USD/HUF continues to hover around the all-time high.
US dollar
The dollar is on the front foot as the new week kicks off, as it continues to find support from safe haven flows. With the number of people infected with coronavirus now over 40,000, according to official Chinese figures, and the number of fatalities at over 900, the spread of the virus is showing no signs of easing.
The dollar also found support from encouraging US data last week. The US non-farm payroll, the most closely watched US macro data release, revealed that 225,000 jobs were created in US in January. This was well above the 160,000 analysts had forecast. Wage growth was also solid at 3.1% year on year, ahead of the 3% forecast.
Recent data from the US has shown that the US economy is on a firm footing. US Federal Reserve Chair Jerome Powell is due to give his semi-annual testimony before Congress later this week. Investors will be hoping for an upbeat tone given recent data, although the Fed’s concerns over the impact of coronavirus could dampen optimism.
Forint
The forint, along with other eastern European currencies, was out of favour across the previous week as investors lent towards “safer” currencies, such as the greenback. Strong US data and coronavirus fears meant that investors were quick to sell out of the forint and other perceived riskier currencies.
This week sees the release of two important Hungarian data points, inflation and GDP data. Inflationary pressures remains strong in Hungary and the reading is expected to come in above the central bank’s upper bound target. This could offer some support to the weak forint.
GDP growth is forecast to come in around 4%. This would represent strong but slowing growth, a trend that analysts expect to see across the region and that follows in the footsteps of Poland, where growth in the last quarter slowed considerably.