HUNGARY: Still No Consistent View on Timing of Next NBH Rate Cut
Dec-10 16:54
Data yesterday showed Hungary’s headline CPI rate moderating to +3.8% Y/Y in November from +4.3% in October. The slowdown was in large part due to strong and favourable base effects in food and fuel prices, and is therefore seen as having little bearing on near-term NBH policy. Nonetheless, some analysts believe that the developments strengthen the case for rate cuts in Q1/Q2-2026. Others still note the possibility that the base rate remains unchanged for all of 2026.
- BofA say the NBH will likely hold the base rate at 6.50%, but add that the Inflation Report may present a case for some dovish shift. They say the likelihood of Q1 rate cuts has probably been strengthened by the recent inflation developments. But for rate cuts to materialise in a credible way, there needs to be some disinflation progress in services, continued HUF stability, and no additional major fiscal spending ahead of elections. If conditions allow, BofA see the NBH carrying out small 25bp easing steps in February/March.
- ING note that the tight monetary policy stance and the base rate are likely to remain unchanged in the short term. There is a significant chance that the benchmark rate will remain at 6.50% for most, if not all, of 2026. This is because the Hungarian economy may be subject to shocks over the next one to two years that carry clear inflationary risks, such as government demand stimulus, the removal of price shield measures, and double-digit minimum wage increases.
- JP Morgan think that despite the downside CPI surprise, there is no reason for the NBH to consider easing policy near-term. Even though well-flagged base effects will probably bring CPI to around 2.5% Y/Y in 1Q26, that will be only temporary. Inflation is bound to re-accelerate to the 4% area soon after as margin-caps and other anti-inflation measures phase out. JPM expect the central bank to keep rates unchanged until after the elections and see the next 25bp cut happening in June only, but with risks skewed to later and less.
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FOREX: Cross/JPY Advance Moderates with Equities Off Highs
Nov-10 16:45
- Price action across the late European and US session has been subdued for G10 FX, with the USD index firming a touch and the Japanese yen edging off its worst levels. Cross/JPY price action has been assisted by the major US equity benchmarks paring their post-cash open gains, emphasising the yen’s ongoing sensitivity to equity sentiment.
- In the background, newly appointed PM Takaichi has already signalled a shift toward more expansionary fiscal policy and said last week that Japan remains only halfway toward achieving stable inflation supported by wage growth. That may be an indication she would like the Bank of Japan to stay cautious as it gradually raises interest rates.
- In a recent MNI policy exclusive, a former board member Makoto Sakurai told MNI the BOJ should raise its policy rate 25bp to 0.75% at the Dec 18-19 meeting, as delaying a move would undermine its independence and risk further yen depreciation amid pressure from U.S. funds.
- While it may need some bravery, USDJPY has once met some resistance above the 154.00 handle, registering a seventh daily high between 154.14-154.48, bolstering the short-term significance of this resistance cluster. First important support to watch lies at 152.68, the 20-day EMA.
- Japan’s economic calendar is quiet this week, with the focus on the upcoming preliminary read of Q3 GDP, scheduled on Nov 17 local time. Governor Kazuo Ueda’s speech to business leaders in Nagoya City on December 01 could be a crucial event ahead of the December BOJ decision.
FED: US TSY 13W BILL AUCTION: HIGH 3.780%(ALLOT 86.83%)
Nov-10 16:32
- US TSY 13W BILL AUCTION: HIGH 3.780%(ALLOT 86.83%)
- US TSY 13W BILL AUCTION: DEALERS TAKE 35.20% OF COMPETITIVES
- US TSY 13W BILL AUCTION: DIRECTS TAKE 5.95% OF COMPETITIVES
- US TSY 13W BILL AUCTION: INDIRECTS TAKE 58.85% OF COMPETITIVES
- US TSY 13W BILL AUCTION: BID/CVR 2.83
FED: US TSY 26W BILL AUCTION: HIGH 3.690%(ALLOT 12.95%)
Nov-10 16:32
- US TSY 26W BILL AUCTION: HIGH 3.690%(ALLOT 12.95%)
- US TSY 26W BILL AUCTION: DEALERS TAKE 32.03% OF COMPETITIVES
- US TSY 26W BILL AUCTION: DIRECTS TAKE 8.74% OF COMPETITIVES
- US TSY 26W BILL AUCTION: INDIRECTS TAKE 59.24% OF COMPETITIVES
- US TSY 26W BILL AUCTION: BID/CVR 2.95
