23 Mar 2015
S&P upgrades Hungary’s rating, but ECB QE might offset its positive impact – KBC
FXStreet (Barcelona) - The KBC Bank Research Team notes that with S&P upgrading Hungary’s rating by on notch to BB+, the positive impact of the rating could be offset by ECB’s QE and a probable rate cut in the country.
Key Quotes
“The CE currencies were generally under a modest pressure on Friday. In the end of the session, the forint was supported by an upgrade of Hungary’s credit rating by one notch to BB+ (with stable outlook) by S&P but the gains were rather limited.”
“The improved credit rating could support Hungarian assets in months to come, especially towards the backdrop of ongoing QE in the euro zone.”
“On the other hand, a rising probability of interest rate hike in the US and likely rate cut in Hungary (we expect the NBH to cut rates by 20 bps on Tuesday) could eventually offset the positive impact of the rating upgrade and ECB’s QE.”
“From this perspective, a new forecast that is to be released this week will be of key importance. If the inflation forecast for the next year was below 2 %, it could trigger a more dovish attitude of the NBH. This is, however, not our base scenario.”
“We expect inflation forecast above that level and therefore see rather cautious and gradual rate cut cycle.”
Key Quotes
“The CE currencies were generally under a modest pressure on Friday. In the end of the session, the forint was supported by an upgrade of Hungary’s credit rating by one notch to BB+ (with stable outlook) by S&P but the gains were rather limited.”
“The improved credit rating could support Hungarian assets in months to come, especially towards the backdrop of ongoing QE in the euro zone.”
“On the other hand, a rising probability of interest rate hike in the US and likely rate cut in Hungary (we expect the NBH to cut rates by 20 bps on Tuesday) could eventually offset the positive impact of the rating upgrade and ECB’s QE.”
“From this perspective, a new forecast that is to be released this week will be of key importance. If the inflation forecast for the next year was below 2 %, it could trigger a more dovish attitude of the NBH. This is, however, not our base scenario.”
“We expect inflation forecast above that level and therefore see rather cautious and gradual rate cut cycle.”