The Hungarian government ended the week making some new ‘perception’ concessions to the EU/IMF contingent. In its reviewed budget plan, the government said it will exclude the central bank from the transaction tax. Until now this had been the key sticking point in aid talks with the EU/IM. The HUF is rounding off the week on firmer footing on the news that a transaction tax on central bank operations will be removed from next year’s budget.
The government has revised its deficit forecast from +2.2% to +2.7% of GDP for 2013. Despite the market taking this as a positive development, analysts note that two issues suggest caution. First, despite the transaction tax having already been passed as a federal law, the government’s announcements are only just “proposalsâ€.
The Hungarian government’s past form has been rather suspect; there is a risk that policy makers “may choose to postpone or alter the planâ€. Second, this announcement should make further rate cuts even more likely. Perhaps the market should remain wary of near term HUF gains? Substantial appreciation by the remains well off and into the future (EURHUF 282.73).
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WEEK AHEAD
- EUR German Trade Balance (euros)
- USD Fed Releases Beige Book Economic Survey
- JPY Machine Orders (YoY)
- CNY New Yuan Loans
- AUD Unemployment Rate
- JPY Consumer Confidence
- EUR German Consumer Price Index (YoY)
- EUR ECB Publishes Oct. Monthly Report
- USD Trade Balance
- JPY IMF, World Bank Group Annual and Spring Meetings
- USD Producer Price Index Ex Food & Energy (YoY)
- USD U. of Michigan Confidence
