Central bankers will give the market the desired hawkishness – ING

Thursday seems to be the highlight of the week. On top of global events today, we also have a Central Bank of Turkey meeting and important speakers in Hungary, ING’s FX analyst Frantisek Taborsky notes.

Market expectations of a first cut shift to December/January

“First thing this morning there is a local conference in Budapest where the finance minister, who according to newspaper rumours is expected to become the next central bank governor, the minister for economy and the deputy governor of the National Bank of Hungary are all expected to speak. With EUR/HUF levels above 400, we believe the speakers will have more attention than usual and we are likely to hear hawkish news from central bankers that could help the HUF get back on track.”

“Later today we will see the Central Bank of Turkey decision. In line with expectations, we expect the rate to remain unchanged at 50%. September inflation numbers surprised to the upside and the market is expecting an additional dose of hawkishness. Market expectations of a first cut are shifting from October/November to December/January, which is showing up in the forward pricing.”

“However, the spot TRY market remains on the same trajectory, which is the main reason we prefer spot over forwards at the moment, collecting high carry. Thus, reassurance from the Central Bank of Turkey should only extend the window where TRY remains the currency of choice for markets, while TURKGBs rather remain on the sidelines, waiting for the first CBT rate cut.”