HUF: EURUSD Surge, Hawkish NBH Help Forint Reach New Multi-Month High
Hawkish commentary from the new NBH Governor as well as the surge in EURUSD above the 1.05 mark have underpinned the forint’s firm showing during Tuesday’s session, with a ~5% drop in European natgas prices likely providing an additional tailwind. For EURHUF, today’s move lower briefly put the cross at a new multi-month low, maintaining the bearish price sequence of lower-lows and lower-highs and signalling scope for an extension towards the 395.00 handle. USDHUF has extended the pullback from Friday’s highs to over 3%.
- In his first comments as central bank chief, Mihaly Varga said the NBH will give a “decisive response” to risks that threaten the inflation goal, financial stability and sustainable economic growth. Meanwhile, a Bloomberg sources report suggested that Varga sees “no room to cut interest rates.”
- The new Governor continues to see HUF stability as a key tenet behind future rate decisions, and in practice this likely means we will see little change to the NBH’s guidance at the Mar 25 rate decision. While this had been expected, further confirmation will continue to ease speculation that monetary easing could resume at some point later in the year, with HUF FRAs continuing to indicate little to no change in rates through 2025.
- EM currencies – save for the Mexican peso – have largely shrugged off the latest tariff developments. President Trump delivered on his threat to hit Canada and Mexico with import levies and doubled an existing charge on China, but this only picked up the stagflationary bias to sell the dollar.
- Meanwhile, EC President Von der Leyen outlined funding plans and instruments worth upwards of €800bln to help the EU rearm in the face of US withdrawal from Ukraine aid. The announcement helped drive EURUSD above 1.05 and the 100-DMA, working in favour of the euro-proxy forint in tandem.
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FED: Powell To Deliver Semi-Annual Testimony In Mid-Feb
The House Financial Services Committee's website confirms that Fed Chair Powell will deliver his semi-annual Monetary Policy Report on Wednesday Feb 12 at 1000ET.
- The Semi-annual testimony will be closely eyed as Powell's first scheduled appearance since the January FOMC - and the House testimony on the 12th is the same day as the release of January CPI (and the week after nonfarm payrolls and benchmark revisions) so will be of particular interest.
US OUTLOOK/OPINION: Nonfarm Payrolls, Revisions Highlight Next Week In US Macro
Friday’s nonfarm payrolls for January highlights the US macro week. It's a highly anticipated report that could alter recent trends considering it will include annual benchmark revisions along with seasonal factors and an updated birth-death model.
- The preliminary estimate for the benchmark revision pointed to the level of payrolls being some 818k lower than currently reported for back in March 2024. There’s a broad expectation from what we can gather that the hit seen next week won’t be as large but it could still be significant. We also watch the seasonal revisions closely, as whilst they should have a zero-sum impact over the calendar year, we’ve noted some particularly favorable seasonal factors in recent months that have biased seasonally adjusted jobs growth higher.
- With these considerations in mind, the early days of the Bloomberg consensus points to nonfarm payrolls growth of 150k after a solid three-month average of 170k. Note that the unemployment rate from the separate household survey won’t be affected by these revisions, having already seen its own seasonal factor revisions last month. A population control will complicate month-on-month changes in the levels of employment and unemployment but shouldn’t be significant for the rate, which is seen unchanged at 4.1% having surprised lower with 4.09% in December. The recent high is technically 4.23% in November having first popped to 4.22% back in July.
- Two other special mentions for the week are: 1) rare remarks from FOMC Vice Chair Jefferson speaking on the economic outlook and monetary policy late on Tuesday with both text and Q&A, having last spoke on Oct 9. 2) ISM services on Wednesday after its priced paid series jumped 5.9pts to 64.4 in December for the highest since Feb 2023.
- Away from macro but still material, the coming week brings the US Treasury's quarterly refunding process - our preview is here.
MACRO ANALYSIS: MNI US Macro Weekly: Uncertainty Vindicates Fed’s Patience
In a largely positive week for economic activity data, including in core durable goods and MNI Chicago PMI, the Q4 GDP accounts stood out by showing a very strong end to 2024 for the consumer.
- As we go to press, though, President Trump has confirmed that tariffs would be imposed on Canada, Mexico, and China beginning this weekend – while also threatening further action against the likes of the European Union and across various import categories.
- The combination of solid growth and policy uncertainty, along with stubborn “supercore” PCE inflation for December, seemingly vindicated the Federal Reserve’s “hawkish hold” at its January meeting.
- A March rate cut is still a possibility but the bar for such an outcome has been set high.
- That gets us to the first key release between now and then: Friday’s nonfarm payrolls for January is the highlight of the US macro week, and could alter recent trends considering it will include annual benchmark revisions along with seasonal factors and an updated birth-death model.
- Other highlights in the upcoming week include ISM Services and the Treasury’s quarterly Refunding announcement (Wednesday), while FOMC Vice Chair Jefferson delivers commentary on the economic outlook and monetary policy Tuesday.
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