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Hungary is on the verge of cutting its interest rates this week, down by 15 points to 0.6% following its surprise reduction in June. If its central bank does implement the cut, the Hungarian forint is already bound to fall further down than it already is. Considering that the country is also one of the most affected countries by the coronavirus, it was already seeing investors flee from exchanging for their currency. Moreover, a trader in Budapest said the EURHUF’s movement could also be influenced by whether the National Bank of Hungary would touch other fiscal tools to help its economy besides the base rate. If, however, the European Union manages to reach a more progressive note for its proposed rescue package, the Hungarian forint could witness a more optimistic market. So far, leaders of northern European Union countries said on Monday that they were willing to compromise on how to use their recovery fund.
The Organization of Petroleum Exporting Countries agreed to ease their oil production cuts on a video conference last week. They previously agreed to cut production by nearly 10 million barrels per day, 10% of global supply, which had helped oil-dependent countries gain against currency rivals for the past few months. However, this will come to an end once the determined production schedule takes place after July. Although oil demand has bounced back from the lows seen in April (it had a daily drop of more than 20 million barrels per day), markets are still worried about oil’s overall status. Because the 14 states where 45% of US oil are used still expected to be kept in storage, oil demand is still expected to see lows. Furthermore, secretary general of OPEC Mohammad Sanusi Barkindo expects oil demand to witness an annual drop of 8.9 million barrels per day for the full year. Risk aversion will therefore win with the EU recovery package progress.
The euro-zloty currency pair as been relatively stable in comparison to other forex pairs in the market since it had stabilized back into its pre-coronavirus bull market in early June. As markets anticipate how Poland plans to do this for the whole country, the EURPLN pair is expected to continue this sideways yet slightly bullish trend in upcoming sessions. Poland’s central bank, after cutting interest rates thrice to almost zero year-to-date, expects its CPI to drop 1.5% by the end of this year. Meanwhile, the European Union is still in talks for its 750-euro rescue package for coronavirus-impacted economies like Poland. Investors are worried that if all countries involved fail to reach a unanimous agreement, the Polish economy might suffer the most. Rising appetite for safer currencies will leave traders rooting for the euro near-term. For now, investors should watch out for positive news about the rescue package.
The European Union is still in discussion for its 750 billion-euro recovery package after the bloc promised to meet for two days maximum. However, the group reached a notable landmark today: it had reached 1.82 trillion euros days after heated debates of the seven-year budget, which could fare well for the Euro currency over the sterling. However, Germany recorded its PPI yesterday with worse results both on year-over-year and month-over-month, decreasing engagement for its currency with worries that the largest economy might not be faring as well as the market thought. The fact that its monthly PPI for the month of June was 0.0% against 0.2% is going to push the single currency down near-term, but since it was higher than May’s 0.4% result, it might not bleed as bad, especially if Britain reports negative news about its trade and fishing industry relations with the EU or their multimillion communications campaign for Britons post-Brexit.
- Trading Instrument