Hungarian forint: recent changes and their causes

This Monday, the Hungarian Forint (HUF) was pushing higher versus the US Dollar (USD) and was over o.7% stronger against it. However, that was more about the weakness of the USD rather than a fundamental gain of strength of the Hungarian currency. At 08:30 this day, the USD/HUF was trading at 294.83, which was well away from the currency’s record low of 314.00 recorded just three weeks before that.

What’s happening to the US Dollar?

Judging from what can already be seen on live Forex trading platforms over the last few weeks, the US Dollar is being massively damaged across the board. It has shown its worst weekly loss in the last four years as the majority of investors rushed towards US bonds, driving bond yields lower and spoiling the American currency’s appeal for others.

However, investors decided to completely ignore the published reports about impressive non-farm payroll.

According to the Labour Department, there were 275,000 jobs created in February, which by far exceeded the promised 175,000 forecasts. Moreover, the unemployment rate has decreased from 3.6% to 3.5%. This report can show that the US economy is still going strong regardless of global concern.

But it is also important to keep in mind the outbreak of coronavirus which severely damaged economies in different countries. And as the number of cases in the United States escalated sharply from the end of February, investors are panicking over how the outbreak can further impact the US economy. Therefore, in the light of recent updates, the US stock markets are expected to open around 4.5% lower regardless of the strong risk of trading. 

• U.S. stock trading halted after deep losses

The connection between the Hungarian Forint and Inflation Rate

The Hungarian Forint seems to be going strong extending the gains from last week. According to data published on Friday, industrial production in Hungary rebounded in January, which ultimately showed a 2.4% increase in YoY, up from a -1.2% decline shown in December 2019. However, that was still lower than the rate promised by the analysts, 3.9%.

Moving further, it is expected that the focus of Hungarian financial analysts will now switch to inflation data which was updated this Tuesday. Notably, it was stated that if the inflation rate will show a declining trend, then this could dampen demand for the Forint as Nation Bank of Hungary is unlikely to change any of its policies.

According to the data revealed,

the inflation rate of the country did show a decrease indeed. Hungarian inflation dropped to 4.4% YoY in February, which is lower than 4.7% in January.

On a monthly basis, however, inflation increased by 0.3%.

The most recent updates on the Hungarian currency

This Tuesday, the Hungarian Forint showed a downward trend versus the US Dollar. It closed 0.07% lower versus the American currency again. Namely, at 09:15 UTC USD/HUF is trading -0.7% at 295.85.

At the same time, the US Dollar keeps fighting for its well-being. But, of course, the fear about the future of the US financial markets dragging US equities, bond yields, and the US Dollar lower did not go anywhere.

This Tuesday, Donald Trump announced that he will issue an emergency economic relief for workers amid the outbreak of coronavirus in the country.

It goes without saying that the prospect of receiving help from Washington has lifted spirits on the trade market.

The decreasing number of cases detected in China is also a promising signal for investors as in the United States, so as outside of it. There are now only 43 new cases identified in China versus 3000 that it was experiencing at the peak of the outbreak.

Most recently, on Wednesday, the USD/HUF was trading 0.5% lower due to on-going concerns about the US response to the coronavirus. At 09:20 UTC, USD/HUF is -0.5% at 295.31, paring gains from the previous session.

Despite remarks made by Finance Minister, Mihály Varga, the Hungarian Forint showed a rise of the price.

Varga has also mentioned that because of the serious damage the coronavirus has done to the global economy, the Hungarian economy could stagnate or even contract slightly this year. He indicated that the economic growth of the country this year can be anywhere around -0.3% – 3.7%. However, if everything goes well and the global economy takes up a path of a V-shaped recovery, then Hungary’s economy could grow between 3.5% – 4% this year.

But even if the economic growth will show an upward trend, the inflation rate is likely to remain low because of the steep decline in oil prices. Notably, oil is not traded at $35 per barrel versus $55 per barrel previously. In turn, the low inflation rate will keep the pressure off the notoriously dovish central bank to raise rates.