29 Apr 2014
EMEA EM Express: Hungary cuts rates, Russia hit by new sanctions
FXStreet (Łódź) - The Russian-Ukrainian crisis remained in the spotlight at the beginning of the week, with fresh EU and US sanctions being imposed on Russia. On Monday the US extended sanctions over seven new individuals and 17 companies, while on Tuesday the EU announced that travel bans and asset freezes would encompass 15 more Russian targets.
Moscow condemned the move saying that it had no intention of invading Ukraine and that the EU was "under Washington's thumb." It also suggested that the sanctions could damage its hi-tech sector.
Also on Tuesday the IMF warned that the geopolitical tensions in central and eastern Europe were posing downside risks to economic recovery, although most of the region should see growth pick up to around 2.3% in2014. Turkey and Russia are the only ones expected to experience a slowdown.
“Developments in Ukraine will continue to affect general risk sentiment in a fairly binary way,” Cristian Maggio, Senior Emerging Markets Strategist at TD Securities suggests. “Negative for markets (i.e. weaker EMFX and higher yields) on further escalation (even just verbal) of tensions, and on the imposition of more far reaching sanctions; positive in the absence of any development.”
The Hungarian Central Bank announced on Tuesday it´s decision to cut the base rate to 2.5% from 2.6%, in line with consensus. Since the beginning of the easing cycle, which started a year ago, the rate has already been reduced by 450bps and analysts believe that the easing could end this month.
“Market implied-rate expectations are little changed, they basically don’t price any further cut in the policy rate, and anticipate a reversal of the cycle starting in 6m (+12bp), with a full 25bp hike priced in not before 9m down the line,” Cristian Maggio remarks.
Israel's central bank, which held its monetary policy meeting on Monday, kept its benchmark rate steady 0.75% for the second running month, after unexpectedly reducing it from 1% in January. The Bank of Israel listed several reasons for remaining on hold, such as the pickup in economic activity in the first quarter of the year, stable inflationary environment, a the weakening of the shekel and the economic slowdown in emerging markets.
Economic data
Turkish Tourism Revenues dropped to USD 4.80B in Q1 from USD 7.77B in Q4, Turkstat reported on Tuesday.
Technicals
USD/HUF was up by 0.02% following the announcement of the central bank at 223.60. EUR/HUF remained basically unchanged, around 308.75. If the central bank affirms that the easing cycle is over in the statement to be released in one hour, it “would likely extend HUF gains and start a process of IRS curve flattening,” in the opinion of Cristian Maggio.
The Russian ruble advanced for the second day on Tuesday. by 0.2% to 41.9510 against the central bank’s target basket of dollars and euros at midday, following yesterday´s 0.6% rise. USD/RUB was down by 0.76% at 35.5715.
Israel's shekel was trading at 3.48 against the greenback on Monday. It has climbed by 0.3% since the Bank of Israel´s last monetary policy meeting.
Moscow condemned the move saying that it had no intention of invading Ukraine and that the EU was "under Washington's thumb." It also suggested that the sanctions could damage its hi-tech sector.
Also on Tuesday the IMF warned that the geopolitical tensions in central and eastern Europe were posing downside risks to economic recovery, although most of the region should see growth pick up to around 2.3% in2014. Turkey and Russia are the only ones expected to experience a slowdown.
“Developments in Ukraine will continue to affect general risk sentiment in a fairly binary way,” Cristian Maggio, Senior Emerging Markets Strategist at TD Securities suggests. “Negative for markets (i.e. weaker EMFX and higher yields) on further escalation (even just verbal) of tensions, and on the imposition of more far reaching sanctions; positive in the absence of any development.”
The Hungarian Central Bank announced on Tuesday it´s decision to cut the base rate to 2.5% from 2.6%, in line with consensus. Since the beginning of the easing cycle, which started a year ago, the rate has already been reduced by 450bps and analysts believe that the easing could end this month.
“Market implied-rate expectations are little changed, they basically don’t price any further cut in the policy rate, and anticipate a reversal of the cycle starting in 6m (+12bp), with a full 25bp hike priced in not before 9m down the line,” Cristian Maggio remarks.
Israel's central bank, which held its monetary policy meeting on Monday, kept its benchmark rate steady 0.75% for the second running month, after unexpectedly reducing it from 1% in January. The Bank of Israel listed several reasons for remaining on hold, such as the pickup in economic activity in the first quarter of the year, stable inflationary environment, a the weakening of the shekel and the economic slowdown in emerging markets.
Economic data
Turkish Tourism Revenues dropped to USD 4.80B in Q1 from USD 7.77B in Q4, Turkstat reported on Tuesday.
Technicals
USD/HUF was up by 0.02% following the announcement of the central bank at 223.60. EUR/HUF remained basically unchanged, around 308.75. If the central bank affirms that the easing cycle is over in the statement to be released in one hour, it “would likely extend HUF gains and start a process of IRS curve flattening,” in the opinion of Cristian Maggio.
The Russian ruble advanced for the second day on Tuesday. by 0.2% to 41.9510 against the central bank’s target basket of dollars and euros at midday, following yesterday´s 0.6% rise. USD/RUB was down by 0.76% at 35.5715.
Israel's shekel was trading at 3.48 against the greenback on Monday. It has climbed by 0.3% since the Bank of Israel´s last monetary policy meeting.