27 May 2014
EMEA EM Express: Hungarian central bank cuts rates again in May, Bank of Israel on hold
FXStreet (Łódź) - The Hungarian central bank, which held its monetary policy meeting on Tuesday continued the easing cycle in May by cutting its main interest rate for the 22nd running month to a record low of 2.4%, in line with forecasts.
The move was prompted by the unexpectedly low inflation reading in April, which dropped by 0.1% after a 10.3% decline in energy costs. The Magyar Nemzeti Bank will release the official statement at 13 GMT.
“The market reaction has been completely absent as the FRA curve was already priced for this outcome,” Cristian Maggio, Senior Emerging Markets Strategist at TD Securities comments. “However, as the market was pricing nothing more than -10bp until the announcement, we are currently observing adjustments that are pricing in an extension of expectations for monetary easing.”
“All eyes will now be focused on the NBH statement, the impact of which may be stronger on the HUF than the curve. If our forecast is right, the NBH may cut another 10bp in June. With a strong HUF response, risks are even further to the downside.”
On Monday the Bank of Israel has also announced its interest rate decision for May, keeping it steady at 0.75% for the third consecutive month, against expectations of a reduction to 0.6%.
“Labor market data continue to indicate growth in employment and reduced unemployment, and there was improvement in indices of consumer confidence and of expectations of activity,” the Bank of Israel said in the official statement.
Israel's Unemployment dropped for the third running month to 5.6% in April.
Economic data
South African Q1 GDP surprised to the downside coming in at -0.6% quarter-on-quarter, compared with the 3.8% growth in Q4 and below forecasts of a 0.1% drop. On an annual basis GDP edged up 1.6%, down from the 2% increase.
“This shows a marked deceleration in growth that may suggest a delay in monetary policy normalization and an economic need for a weaker currency in S. Africa,” as Jacqui Douglas, Senior Global Strategist at TD Securities suggests.
Turkish Consumer Confidence deteriorated slightly to 76 in May from 78.5 seen in April, EcoWin informed on Tuesday.
Technicals
The Hungarian forint traded at 303.48 per euro following the announcement of the central bank's interest rate decision, up from the 302.60 lows earlier in the morning. USD/HUF was up 0.28% at 222.4600.
The USD/HUF daily FXStreet Trend Index was slightly bullish and the OB/OS Index was neutral. RSI stood at 52 at the last close, and has risen to 57 so far today.
The Israeli shekel strengthened by 0.3% per dollar to 3.4768 following the rate decision.
The South African rand fell 0.8% to 10.4366 against the greenback on disappointing GDP numbers.
The move was prompted by the unexpectedly low inflation reading in April, which dropped by 0.1% after a 10.3% decline in energy costs. The Magyar Nemzeti Bank will release the official statement at 13 GMT.
“The market reaction has been completely absent as the FRA curve was already priced for this outcome,” Cristian Maggio, Senior Emerging Markets Strategist at TD Securities comments. “However, as the market was pricing nothing more than -10bp until the announcement, we are currently observing adjustments that are pricing in an extension of expectations for monetary easing.”
“All eyes will now be focused on the NBH statement, the impact of which may be stronger on the HUF than the curve. If our forecast is right, the NBH may cut another 10bp in June. With a strong HUF response, risks are even further to the downside.”
On Monday the Bank of Israel has also announced its interest rate decision for May, keeping it steady at 0.75% for the third consecutive month, against expectations of a reduction to 0.6%.
“Labor market data continue to indicate growth in employment and reduced unemployment, and there was improvement in indices of consumer confidence and of expectations of activity,” the Bank of Israel said in the official statement.
Israel's Unemployment dropped for the third running month to 5.6% in April.
Economic data
South African Q1 GDP surprised to the downside coming in at -0.6% quarter-on-quarter, compared with the 3.8% growth in Q4 and below forecasts of a 0.1% drop. On an annual basis GDP edged up 1.6%, down from the 2% increase.
“This shows a marked deceleration in growth that may suggest a delay in monetary policy normalization and an economic need for a weaker currency in S. Africa,” as Jacqui Douglas, Senior Global Strategist at TD Securities suggests.
Turkish Consumer Confidence deteriorated slightly to 76 in May from 78.5 seen in April, EcoWin informed on Tuesday.
Technicals
The Hungarian forint traded at 303.48 per euro following the announcement of the central bank's interest rate decision, up from the 302.60 lows earlier in the morning. USD/HUF was up 0.28% at 222.4600.
The USD/HUF daily FXStreet Trend Index was slightly bullish and the OB/OS Index was neutral. RSI stood at 52 at the last close, and has risen to 57 so far today.
The Israeli shekel strengthened by 0.3% per dollar to 3.4768 following the rate decision.
The South African rand fell 0.8% to 10.4366 against the greenback on disappointing GDP numbers.