25 Mar 2014
EMEA EM Express: Hungarian National Bank cuts key rate to 2.6%, as projected
FXStreet (Łódź) - The Hungarian National Bank (the Magyar Nemzti Bank) announced its monetary policy decision on Tuesday to lower the benchmark rate from 2.7% to 2.6%, as widely expected.
In the opinion of Cristian Maggio, Senior Emerging Markets Strategist at TD Securities the Monetary Council “remains firmly dovish in its core view” and continues to believe that “rates should be cut further to assist growth (which is slowly resurging) while inflation remained utterly slow at 0.1% Y/Y in February.”
“Even more supportive of monetary easing is the fact that core inflation is easing below the 3% target, while headline CPI will remain near the zero level for a few months,” the analyst suggests.
On Monday the Bank of Israel kept its interest rate unchanged at 0.75%, after cutting it from 1% in February.
Meanwhile, on Monday Russia's Deputy Economy Minister Andrei Klepach said that on an annual basis Russia's GDP grew by 0.3% in February, following 0.1% in January, which was "not bad" and "better than expected." The increase was due to due to an improvement in industrial production, retail sales and investments dynamics. Klepach also rejected the possibility of GDP contracting in the first half of 2014, despite the weak first quarter.
"There won't be a recession, but there is a problem of stagnation: it's length and depth. Unfortunately the investment slump is continuing. I'm not ready to say how long it will continue," the minister said.
Dimitry Polevoy from ING comments: “We do share the view that the YoY GDP growth may remain above zero in 1H14 with a slight acceleration in 2H14. However, we do not see any material reasons of sharper improvement in domestic demand as both local and external factors now solely act for slower growth. “
“We also think that any slowdown in domestic demand would be mostly offset by weaker imports performance under non-deteriorating export growth, ie with net exports hopefully contribution positively to the overall GDP performance.”
Meanwhile, the leaders of the Group of Eight world industrial powers decided on Monday to suspend Russia as a member and canceled the upcoming summit in Sochi in June. The G7 warned that they were ready to impose harsh sanctions on the country, targeting specific sectors such as energy or finance, if it continues the occupation of Crimea.
Economic data
On Tuesday the Polish Central Statistical Office released the Unemployment Rate which in February decreased to 13.9%, from 14.0% in January, against forecasts of rising to 14.1%. Polish Retail Sales, also published on Tuesday jumped 7% in February, up from the 4.8% increase the previous month and above consensus of +5.9%.
Technicals
Following the Hungarian Central Bank's decision to reduce interest rates to 2.6% today, EUR/HUF dropped to 311.90 from around 312.25 a while before.
As Cristian Maggio, Senior Emerging Markets Strategist at TD Securities comments: We are under the impression that the market is now anticipating an explicit call for the end of the cycle. We highlight that this may not happen, leaving EUR/HUF room to rebound higher.
Meanwhile, the Russian ruble rose 1.2% per dollar and 1.3% per euro today, as Russian companies bought the currency to meet a tax deadline. The ruble advanced 1.2% to 41.7897 against the central bank’s dollar-euro target basket.
"Ruble has strengthened, there is some balance now, and if there is some stability in external economic factors, the ruble shouldn't weaken further," Russia's finance minister Anton Siluanov said on Tuesday.
In the opinion of Cristian Maggio, Senior Emerging Markets Strategist at TD Securities the Monetary Council “remains firmly dovish in its core view” and continues to believe that “rates should be cut further to assist growth (which is slowly resurging) while inflation remained utterly slow at 0.1% Y/Y in February.”
“Even more supportive of monetary easing is the fact that core inflation is easing below the 3% target, while headline CPI will remain near the zero level for a few months,” the analyst suggests.
On Monday the Bank of Israel kept its interest rate unchanged at 0.75%, after cutting it from 1% in February.
Meanwhile, on Monday Russia's Deputy Economy Minister Andrei Klepach said that on an annual basis Russia's GDP grew by 0.3% in February, following 0.1% in January, which was "not bad" and "better than expected." The increase was due to due to an improvement in industrial production, retail sales and investments dynamics. Klepach also rejected the possibility of GDP contracting in the first half of 2014, despite the weak first quarter.
"There won't be a recession, but there is a problem of stagnation: it's length and depth. Unfortunately the investment slump is continuing. I'm not ready to say how long it will continue," the minister said.
Dimitry Polevoy from ING comments: “We do share the view that the YoY GDP growth may remain above zero in 1H14 with a slight acceleration in 2H14. However, we do not see any material reasons of sharper improvement in domestic demand as both local and external factors now solely act for slower growth. “
“We also think that any slowdown in domestic demand would be mostly offset by weaker imports performance under non-deteriorating export growth, ie with net exports hopefully contribution positively to the overall GDP performance.”
Meanwhile, the leaders of the Group of Eight world industrial powers decided on Monday to suspend Russia as a member and canceled the upcoming summit in Sochi in June. The G7 warned that they were ready to impose harsh sanctions on the country, targeting specific sectors such as energy or finance, if it continues the occupation of Crimea.
Economic data
On Tuesday the Polish Central Statistical Office released the Unemployment Rate which in February decreased to 13.9%, from 14.0% in January, against forecasts of rising to 14.1%. Polish Retail Sales, also published on Tuesday jumped 7% in February, up from the 4.8% increase the previous month and above consensus of +5.9%.
Technicals
Following the Hungarian Central Bank's decision to reduce interest rates to 2.6% today, EUR/HUF dropped to 311.90 from around 312.25 a while before.
As Cristian Maggio, Senior Emerging Markets Strategist at TD Securities comments: We are under the impression that the market is now anticipating an explicit call for the end of the cycle. We highlight that this may not happen, leaving EUR/HUF room to rebound higher.
Meanwhile, the Russian ruble rose 1.2% per dollar and 1.3% per euro today, as Russian companies bought the currency to meet a tax deadline. The ruble advanced 1.2% to 41.7897 against the central bank’s dollar-euro target basket.
"Ruble has strengthened, there is some balance now, and if there is some stability in external economic factors, the ruble shouldn't weaken further," Russia's finance minister Anton Siluanov said on Tuesday.