Although Monday was a national holiday in Hungary, there remains a lot of key events for four days. The monthly policy meeting by the National Bank of Hungary (MNB) on Tuesday afternoon is one of these, but we should also be watching the European Central Bank (ECB) closely as its policy meeting on Thursday could be decisive not only for the euro but also for Hungary’s forint. The series of third-quarter GDP data releases will also continue, and by the end of the week we’ll know how the U.S. economy fared in July-September.
Due to a national holiday on Monday the week practically starts only today in Hungary, but in respect of macroeconomic releases we have not missed anything even on the global front.
On Tuesday morning, the Central Statistical Office (KSH) will release revised retail sales data for August. We should also keep an eye on the latest manufacturing and services purchasing manager index (PMI) figures elsewhere in Europe. After a rather busy morning, all eyes will be on Hungary’s central bank (MNB) that will release the outcome of its monthly policy meeting at 2 P.M. today.
The MNB eased monetary conditions further by unconventional means in September (it lowered the overnight deposit rate by 10 basis points to -0.15% and reduced the cap on its 3-month deposit facility to HUF 75 bn for the end of December). After the decisions the forint eased to around 313 to the euro then, but the influence of the monetary easing evaporated over the last few weeks, and EURHUF is back at 308, although analysts believe the very purpose of the measures was to weaken the forint. Consequently, some on the market believe the MNB will ease monetary conditions further today, although the majority think that the Monetary Council would not want to act before the ECB’s policy meeting on Thursday.
Whatever step the central bank will decide to take, it will have an interesting impact on the forint. A non-event could cause disappointment to some investors that might interpret the MNB’s hesitation as a sign of insufficient commitment to easing. And that could trigger significant forint firming.
On Wednesday morning, the stats office is set to release birth and death statistics, and in the morning Germany’s IFO index and British GDP data should also be watched. In the second half of the week, there will be one key release overseas.
On Thursday, all eyes will be on the ECB. The bank’s policy meeting in the afternoon dwarfs every other data release, hence Hungary’s latest unemployment figures could also get limited attention. The ECB decision and a subsequent press release by ECB President Mario Draghi are to follow as scheduled. The last time Draghi promised in early September that there would be a decision on QE tapering at the October meeting. The most likely scenario is that the asset purchase programme will be retained, but with a smaller monthly target, and QE will be phased out entirely next year. Therefore the meeting will be important not only for the euro and the European Union, but also for the future of the forint and MNB policy. If the ECB decides to rapidly call off QE, the Hungarian central bank could also refrain from further monetary easing. Otherwise, it could deploy further unconventional easing tools in the coming months.
After such an eventful three days, we should think investors will be able take a break on Friday. Well, think again! There is a key GDP release in the U.S. pipeline for the afternoon which will reveal whether the American economy came to a halt in Q3 or not. Analysts believe that partly due to the devastating hurricanes GDP growth decelerated to 2.6% yr/yr in Q3 from 3.1% in the second quarter. These data are generally revised at least twice so changes are prone to be made later on. Front page photo by Frederick Florin/AFP
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