Why is the forint so weak today?

HUNGARY - In Brief 09 May 2016 by Istvan Racz

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Since January, the forint has been firmly holding the EURHUF 310-315 range, even frequently trying to break out at the strong end, which the MNB has been fighting against fervently. But today, it weakened to EURHUF 316, following some initial decline to EURHUF 314 on Friday. So what happened? We have a few guesses: 1. Regional trends are mixed. Rand and lira fell today, but the zloty gained strength. So it does not look like a typical regional issue. 2. A rather weak industrial figure came out on Friday morning, and the HUF weakening started just after that. Output fell on mom basis for the fifth consecutive month in March, and this time it also fell on yoy basis, the first time since March 2013. 3. Today, the April cash budget deficit was reported at HUF19bn, a very low figure compared to HUF73bn a year ago. The four-month deficit was just HUF145bn, marking a deficit/GDP ratio 3.8 points lower than in January-April 2015. Fiscal policy continues to be too tight, which requires monetary loosening, even after the recently announced amendment of the budget, to raise expenditure by HUF401bn (1.2% of GDP) this year. 4. On Friday, the first estimate of Q1 GDP will be due. In April, we set up a 0.2% qoq, 2.4% yoy forecast, clearly below market consensus at the time. But following the March industrial data, which imply a miserable +0.5% yoy for gross output in Q1, -0.2% qoq, 2% yoy is much more likely for Q1 GDP. 5. The story of the MNB's educational foundations, of which we wrote earlier here at GSD, has reached Financial Times today. FT is talking about a 'controversy' but the story is clearly about massive corruption charges raised against the governor of the country's cent...