USD/HUF: Forint Advances Even As Manufacturing Stagnates

The Hungarian forint is once again trading higher versus the US dollar, as the markets open for the new week. After rallying 1.27% against the greenback in the previous week, the Hungarian forint is up a further 0.9% on Monday, although this has been more of a dollar weakness story rather than owing to any impressive fundamental changes to the Hungarian economy.

At 09:30 UTC the forint had strengthened just shy of 1% and was trading at 303.95, as it continues to recover from record lows.

Hungarian Manufacturing PMI at 50.1

The forint was on the rise in early trade, despite manufacturing activity in Hungary almost stagnating. The Hungarian manufacturing PMI declined to just 50.1 in February. This was down from 53 in January and below expectations of 52.2. The figure 50 separates expansion from contraction.

The data comes after last week the Hungarian Central Statistical Office confirmed Hungary’s annual GDP for 2019 was unchanged at 4.5%. Whilst domestic demand offered support to the economy, net exports plunged amid easing external demand. Overall this was a reasonable performance the outlook for the economy is more uncertain owing to coronavirus and the threat that it poses via supply chain disruption. The risks are tilted to the downside.

Dollar Remains Pressurised By Rate Cut Expectations

The US dollar traded on the back foot last week and was extending those losses in early trade on Monday. Investors are almost certain that the Federal Reserve will cut interest rates at its March meeting. As the odds of a rate cut increased, the value of the dollar decreased.

After much speculation across the previous week, Federal Reserve Chair Fed Jerome Powell hinted on Friday that the Fed stands ready to ease monetary policy to support the US economy in the face of coronavirus risk. However, he added that he thought that the US economy remained is solid shape overall.

Investors will continue digesting coronavirus headlines as more cases are confirmed in the US and 2 people die. US ISM manufacturing PMI figures will also be under the spotlight. Over the weekend China reported factory activity in February slumping to the weakest on record to 35.7 as the coronavirus outbreak hits the world’s second largest economy. The US is expected to show activity of 50.5, as coronavirus is yet to heavily impact the US economy.

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