Hungarian forint is increasingly vulnerable to attack

2020 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
External Environment ◽  
Central Banks ◽  
Content Type ◽  
China Trade ◽  
Bond Yield ◽  
The Us ◽  
National Bank ◽  
Global Growth

Subject Central banks’ policy dilemmas. Significance The National Bank of Hungary (MNB) remains extremely reluctant to raise interest rates despite increasing pressure on the forint. While growth in the euro-area is likely to remain weak this year, strengthening the case for rates to remain on hold, a more supportive external environment, underpinned by an easing of US-China trade tensions, would accentuate the policy dilemmas confronting Central Europe’s central banks, especially given rises in inflation. Impacts Germany’s still-negative ten-year bond yield has risen from record lows in September as markets become less pessimistic about global growth. Markets expect Hungarian monetary policy to remain very dovish, as the domestic twelve-month bond-yield’s end-October turn negative shows. The US S&P 500 index surged by nearly 30% last year and if US-China trade tensions ease slightly this should help it to maintain momentum.

Trade uncertainty makes interest rates less effective

2019 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Developed Countries ◽  
The United States ◽  
Content Type ◽  
Forward Guidance ◽  
China Trade ◽  
The Us ◽  
Jackson Hole ◽  
Market Outlook

Subject Financial market outlook. Significance At the annual gathering last month of the world’s central bankers in Jackson Hole, Wyoming, policymakers acknowledged that the economic uncertainty that the US-China trade conflict is generating was undermining the efficacy of monetary policy. James Bullard, the president of the St Louis Federal Reserve (Fed), warned that developed countries are experiencing a “regime shift” in economic conditions, in which trade-war-induced uncertainty -- and the unpredictability of US policy more broadly -- is becoming a permanent feature of policymaking, sapping the potency of forward guidance and overburdening monetary policy. Impacts Since the US tariff increase in May, the global stock of negative-yielding bonds has surged above 16 trillion dollars and will rise further. The dollar is at its highest since May 2017 and seems likely to rise further as US growth is far outpacing other major developed markets. The renminbi/dollar rate fell the most on record in August, raising capital outflow risks, most likely to the United States or Japan.

Monetary policy will remain loose in Central Europe

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Central Europe ◽  
Emerging Market ◽  
Central Banks ◽  
Currency Markets ◽  
Bond Yields ◽  
Content Type ◽  
Inflation Rates ◽  
National Bank

Subject Factors keeping monetary policy loose, despite stronger growth. Significance The Hungarian National Bank (MNB), one of the most dovish emerging market (EM) central banks, has cut its benchmark interest rate to a record low and called an end to its three-year-long monetary easing cycle. Hungary's inflation rate has only just turned positive after a period of deflation. The Czech National Bank (CNB) has been forced to intervene in the currency markets for the first time since 2013 in order to stem appreciation of the koruna, which is being buoyed by a stronger-than-expected growth pick-up. However, the prospect of subdued inflation should allow central banks in Central Europe (CE) to keep interest rates at current levels for a considerable period of time. Impacts The renewed decline in oil prices will exert downward pressure on inflation rates in many advanced and emerging economies. Exceptionally low CE local government bond yields could spark a sell-off if fallout from higher US interest rates is sharper than expected. The ECB's sovereign QE programme, to run at least until September 2016, should help mitigate any Fed-driven deterioration in CE sentiment.

Central bank action will drive global equity markets

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Equity Markets ◽  
Economic Data ◽  
Equity Prices ◽  
Monetary Policies ◽  
Content Type ◽  
Market Sentiment ◽  
The Us ◽  
Us Monetary Policy

Significance This volatility is driven by expectations of further monetary stimulus in response to a slowing economy. Despite persistent concerns about the fallout from the anticipated tightening in US monetary policy and many country-specific risks, such as the standoff between Greece and its creditors, equity market sentiment remains supported by accommodative monetary policies worldwide and expectations of the US monetary policy tightening being gradual. Impacts Market volatility could increase further, as better-than-expected economic data in the euro-area vies with weaker-than-anticipated US data. Decoupling of surging equity prices and weak economic fundamentals threatens the rally's sustainability, increasing scope for volatility. This decoupling is most pronounced in China, where weak economic data prompt buying of equities in anticipation of stimulus measures. The greatest risk in equity markets is uncertainty surrounding US interest rates and their impact on emerging markets.

Ultra-loose monetary policy will soon run its course

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Financial Markets ◽  
Interest Rates ◽  
Mutual Funds ◽  
Investor Sentiment ◽  
Central Banks ◽  
Target Range ◽  
Content Type ◽  
Equity Mutual Funds

Significance Expectations that the Fed will refrain from hiking its benchmark rates from its target range of 0.25-0.5% and that the Japanese central bank will provide further stimulus are suppressing volatility in financial markets and fuelling demand for risk assets. However, evidence that "overburdened" monetary policy is losing its efficacy triggered a sell-off in bonds and equities on September 9, increasing the scope for sharper price falls as investors worry that central banks have run out of ammunition. Impacts Services expanded in August at their slowest pace since 2010, making it less likely that the Fed will raise interest rates this month. EM bond and equity mutual funds have enjoyed a surge in inflows since the Brexit vote as yield-hungry investors pour money into risk assets Oil, a key determinant of investor sentiment, will stay below 50 dollars/barrel unless major producers agree measures to stabilise prices.

Prospects for the global economy in the fourth quarter

2015 ◽  
Keyword(s):  
Interest Rates ◽  
Global Economy ◽  
Fourth Quarter ◽  
Content Type ◽  
Bank Of China ◽  
Policy Interventions ◽  
The Us ◽  
Global Demand ◽  
Global Growth ◽  
China’S Economy

Subject Prospects for the global economy in the fourth quarter. Significance Three threats are on the horizon. Firstly, the US Federal Reserve (Fed) might raise interest rates this year. This move, though well signalled, may have negative repercussions, especially in emerging markets (EMs). Secondly, China's economy, a key to global growth, is slowing and its financial markets are exceptionally volatile. These factors have already elicited policy interventions such as renminbi depreciation and further rate cuts by the People's Bank of China (PBoC). Finally, there is no apparent end in sight to weak global demand and the fall in commodities prices that has left commodity-exporting countries struggling with precipitous drops in revenue.

Another rating upgrade is likely for Hungary soon

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Banking Sector ◽  
Credit Rating ◽  
Emerging Market ◽  
Investor Sentiment ◽  
Central Banks ◽  
The Philippines ◽  
Content Type ◽  
Investment Grade

Significance Hungary thereby regains investment-grade status, albeit at the lowest level, from being downgraded to 'junk' because of doubts about the government's policies and the high public debt burden. Hungary's improving creditworthiness, underpinned by its current account surplus and deleveraging in the banking sector, contrasts with the increasing strain on Poland's credit rating. Political risk has become a major driver of investor sentiment towards emerging markets. Impacts Emerging market assets have become more vulnerable as investors reprice US monetary policy. Futures markets are now assigning a 51% probability to another rise in US interest rates at or before the Federal Reserve's July meeting. Central Europe's government bond markets are being supported by the persistently dovish monetary policy stance of its central banks. This contrasts with Latin America, where inflationary pressures are forcing many central banks to raise rates. Brazil, Turkey, Poland and the Philippines are among several countries where political uncertainty is a key determinant of asset prices.

Japan will stay the course on monetary easing

2018 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Central Banks ◽  
Quantitative Easing ◽  
Content Type ◽  
Bank Of Japan ◽  
Target Date ◽  
Low Levels ◽  
Global Economic Growth ◽  
First Time

Subject Monetary policy in Japan. Significance The monetary policy board of the Bank of Japan (BoJ) at its last meeting abandoned its prediction of when the nation will reach its 2% inflation target, the first time it has omitted a target date since Governor Haruhiko Kuroda introduced his policy of radical monetary easing five years ago. Impacts Japan’s interest rates will remain at historically low levels for at least two more years. The yen will remain relatively weak as other countries’ central banks end their quantitative easing programmes. A weak currency plus widespread global economic growth will create strong demand for Japanese exports.

Further Mexico rate hikes likely in 2018

2017 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Federal Reserve ◽  
Content Type ◽  
The Us ◽  
Wage Increases

Subject Monetary policy moves. Significance The Bank of Mexico (Banxico) increased its target interest rate by 25 basis points, to 7.25%, on December 14, responding to a similar move by the US Federal Reserve (Fed) the previous day. The hike was the first to be taken under new Governor Alejandro Diaz de Leon and pushes the rate to its highest level since March 2009. Impacts Tighter monetary policy will weigh on growth in 2018 and may hit the PRI’s electoral prospects. More expensive credit will hit consumption moderately, as interest rates remain relatively low by historical standards. The possibility of wage increases edging up will feed inflationary expectations.

Weak forint will not shift Hungary’s monetary policy

2019 ◽  
Keyword(s):  
Government Bond ◽  
Content Type ◽  
The Past ◽  
China Trade ◽  
Bond Yield ◽  
The Us ◽  
Growth Prospects ◽  
Trade War ◽  
Chinese Trade ◽  
Roll Back

Significance It dropped to 332.2, a decline of 5.7% since March 10, when the forint reached its strongest level against the euro this year. While the forint has fallen steadily against the single currency over the past several years -- it has lost 18% since November 2012, with half the decline occurring since mid-2017 -- it has come under more strain since March, owing to a combination of fallout from the US-China trade war and the persistently dovish policy stance of Hungary’s Central Bank (MNB). Impacts Markets have become increasingly pessimistic about the growth prospects for the euro-area. A technical recession is increasingly probable in Germany, where the benchmark ten-year government bond yield is at a near-record low. Central Europe’s economies are decoupling from the industrial slowdown in the largest EU economy, although divergences are narrowing. Renewed hopes of a US-Chinese trade truce, including a possible roll-back of existing tariffs, are improving sentiment towards EM.

US rates rift will fuel financial market volatility

2019 ◽  
Keyword(s):  
Financial Markets ◽  
Bond Markets ◽  
Open Market ◽  
Federal Open Market Committee ◽  
Content Type ◽  
Us Economy ◽  
China Trade ◽  
The Us ◽  
Investment Grade ◽  
Global Growth

Subject Financial markets outlook. Significance The decision of the US Federal Reserve (Fed) on September 18 to lower its main policy rate while not assuring investors that it will continue to loosen monetary policy is exposing divisions within the Federal Open Market Committee (FOMC), and between the Fed and bond markets. The ‘hawkish cut’ came with three dissensions, reflecting the disconnect between the resilient US economy and the deterioration in the global growth outlook. Impacts Cautious investor optimism that a US-China trade truce will be struck is fuelling US equity gains, but a substantial deal seems unlikely. The Brent oil price fell back within days following the drone attacks on Saudi Arabian oil facilities, but more short spikes are possible. Almost one-third of investment-grade government and corporate bonds are negative yielding; those with zero lifetime coupon are riskiest.

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