Gas Prices and Forint Outlook: Temporary Depreciation Presents Buying Opportunity
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CEE: Gas prices as a window to a cheaper forint
Today's calendar in the region is basically empty and thanks to the US holidays we can expect lower activity in the CEE region as well. Yesterday's trading ended with a weaker forint and flat koruna despite our expectations.
As we mentioned yesterday, gas prices have once again become a strong driver for HUF and CZK in recent weeks. Yet, at the end of yesterday's trading, a decline in gas prices was already observed after the end of some seasonal work in Norway which limited the capacity of flow. Gas flow is thus slowly returning to normal and in our view it is too early to worry about storage levels in import-dependent countries such as Hungary and the Czech Republic ahead of the upcoming winter.
We thus see the current depreciation of the HUF and CZK as temporary and, especially in the case of Hungary, we expect the market to take the opportunity to buy the forint at a discount and benefit from the still massive carry.
In addition, June inflation in Hungary will be published on Friday, which we think has a good chance to surprise to the downside compared to market expectations. Yet, in the last three months, lower inflation has been a signal for the market to buy the forint as confirmation that things are returning to normal in the country with the highest inflation in Europe. Overall, we still expect the forint to return to 370 EUR/HUF by the end of this week.
