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The USD/HUF exchange rate will be in the spotlight on Tuesday as the Hungarian central bank concludes its monetary policy meeting. The pair was trading at 351 on Tuesday, a few points above the November low of 342. It has retreated by more than 21% from its highest point this year.
Hungarian central bank decision
The Hungarian forint has done relatively well even as the country’s economy has continued to underperform. It has jumped by over 21% against the US dollar and by 12% against the euro.
The focus among traders will be the next action by the Hungarian central bank. Economists are torn on what to expect when it concludes its two-day meeting. Some economists see the bank hiking rates by 0.25% to 11.25% while others expect it to pause.
The central bank has embraced a relatively dovish tone in the past few months. It has slashed rates in the past three straight meetings, bringing the benchmark from the year-to-date high of 13% to 11.50%.
These cuts happened as signs emerged that the country’s inflation was heading in the right direction. The headline Consumer Price Index (CPI) dropped from last year’s high of over 25% to 7.9%. This reading is still higher than the European average of about 2.4%.
A rate hike will be a big setback for the Hungarian government, which is working to engineer a turnaround now that it is in a prolonged recession. It is going through the longest technical recession on record. In a note, analysts at ING said:
“However, as the central bank seems pretty set on the pace of easing, we don’t expect any major surprises. We see a continuation of the 75bp rate cutting cycle in December.”
The National Bank of Hungary’s decision comes at a time when the Fed and ECB are expected to start cutting interest rates in 2024.
USD/HUF technical analysis
The USD to HUF exchange rate has drifted downwards in the past few days as the US dollar index has eased. On the daily chart, the pair has moved below the lower side of the Andrews Pitchfork tool. It has also moved slightly above the 61.8% Fibonacci Retracement level.
The USD/HUF pair remains below the 50-day and 25-day Exponential Moving Averages (EMA) while the MACD is pointing upwards. Therefore, the outlook for the pair is neutral for now. More downside will be confirmed if the price moves below the support at $342.97. If this happens, the pair will likely retreat and retest the support at 331.67, its lowest level in July.
The post USD/HUF: Forint in focus ahead of Hungary rates decision appeared first on Invezz
