The good news is that there is no bad news

In October the six-month negative trend came to an end in the financial markets. The good news was that there was no bad news – although none of the dangers (Russia attacking the Ukraine, Greece quitting the euro zone, Chinese economy slowing down, etc.) disappeared. In Hungary the MNB (the central bank) took several steps in the direction of cutting the base rate again, which would contribute to achieving the inflation target. The forint’s exchange rate also suggests further base rate cuts, because even in the positive, supportive environment it was unable to go below 310 and stay there. Until the end of the year we expect the volatility to continue, with local peaks and nadirs. If interest rates rise in the USA, currencies in the region may suffer, having a negative influence on the forint and the market of Hungarian government bonds too. n