Net real wages likely to drive Hungarian economy this year

Rising net real wages since the crisis have stimulated the Hungarian retail sales. The growing net real wages are expected to mainly drive the economic growth in 2016, which is likely to be about two percent y/y. Meanwhile, inflation is likely to accelerate higher with the help of a relatively solid and continuously robust consumption, said KBC Market Research in a research report.

This implies that the National Bank of Hungary is unlikely to lower the base interest rate further this month in spite of the surprise slow down of inflation back to negative territory.

For the EUR/HUF currency pair, the areas around 312.5 and 311 are solid support levels. The EUR/HUF might halt the current rally, particularly in case of solid US data. Moreover, the uncertainties regarding Brexit vote might not underpin further appreciation of HUF in the near term. Therefore, there is a major possibility of certain correction followed by side moves.