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The forint extends its gains despite sell-off in EM’s world

The Hungarian forint has continued to strengthen and keeps its bullish sentiment. The EUR/HUF moved below 310 and crossed the 100-days moving average, just like PLN/HUF, which was traded at 74, CZKHUF decreased around 11.26, which was close to the 100-days moving average. It looks like that the relatively fast economic growth and especially the NBH statement that all the foreign currency need of the bank sector related to the foreign currency denominated households loans has to be converted with the NBH made the HUF more attractive (some of the risks were priced out).

The Hungarian foreign trade and current account balance also strongly supports HUF’s strengthening. According to the latest figure published by the statistical office today, Hungary’s 12-months rolling foreign trade balance stabilized around EUR 6.7bn. Both the import and export expanded by around 9% Y/Y in euro term, while by above 14% Y/Y in HUF term. The main drivers of the export growth are still machineries, vehicles.

The main question is who long this strengthening power may remain on the HUF market. Today’s ECB decision might be crucial. The 200-days moving average of the EUR/HUF is around 308.5, while the strong edge of the EUR/HUF’s weakening channel is around 307.8. So we cannot really speak about a changing trend before the HUF is not able to break these levels. If the ECB stands out with a very dovish stance, the momentum might be there to cross these levels, in other case we think that the HUF is close to the end of its last two weeks rally.

This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.

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