HUF: EURHUF Pares Earlier Gains as NBH Meeting Enters Focus
EURHUF has pared an earlier 0.3% bounce, and is once again testing below 20-day EMA support, intersecting just above 406. Major equity benchmarks remain firmly in the green on the week overall, providing a tailwind for the forint. Indeed, the more stable risk backdrop has helped EURHUF 1-month implied vols fall to their lowest level since February, while 1-month risk reversals continue to indicate falling costs of hedging against forint weakness.
- White House Middle East envoy Steve Witkoff has been received by Russian President Vladimir Putin at the Kremlin for their fourth set of in-person talks, with the Hungarian forint still sensitive to developments regarding the Russia-Ukraine war. The meeting comes just one day after US President Donald Trump criticised Russia's missile barrage against Kyiv.
- Focus will be shifting to next week’s NBH rate decision, where no change to the 6.50% base rate is expected. Earlier this week, Governor Mihaly Varga warned that global recession and inflationary risks are rising due to the Russia-Ukraine war, tariff tensions and weakness of the German economy. Varga also reiterated that the central bank is committed to achieving and maintaining price stability – comments which are very much in-line with previous rhetoric.
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UK FISCAL: OBR estimates for impact of planning reforms on GDP
OBR estimates the planning reforms will permanently increase GDP by 0.2% 2029/30 and 0.4% of GDP in 10-years. Reeves says this is the largest growth boost from a single policy in the OBR's history.
- She says all Labour policies will boost growth by 0.6% of GDP in 10-years.
GILTS: Futures Near Support
A reminder that the key support level in futures lies at the Mar 6 low and bear trigger (90.71), which is 4 ticks below session lows.
GILTS: Lower On Borrowing Outlook
A RTRS calculation noting that OBR forecasts show GBP47.5bln more borrowing between 2024/25 and 2029/30 vs. the October forecasts seems to be the trigger for the recent gilt weakness.
- Futures to fresh session lows at 90.75, yields now little changed to 4bp higher, curve still steeper. CPI-driven rally now more than fully reversed.
