- The cost of agreement between Hungarian banks and the government on FX mortgages looks workable. The currently proposed 180 CHF/HUF rate translates into a cost of HUF30-40bn per year, equivalent to 0.15-0.2% of GDP) and is much more controlled than full scale conversion.
- The final announcement should come by Tuesday. As well as the CHF/HUF fixing rate, it should also include timing for the withdrawal of the foreclosure moratorium and some form of scheme which ensures improved lending toward SMEs and households in exchange for a lower bank tax.
- On a longer term horizon broader agreement (which includes other elements as well as the CHF/HUF fixing) which re-ignites banking sector lending and encourages foreign banks to maintain their exposure to Hungary is crucial to HUF stability.
- In the near term following the recent under performance and cleaner positioning we believe risk reward has improved on bullish HUF positions. We hence recommend selling EUR/HUF running into the announcement with a target at 260 and stop loss at 272.
Click here to read the full report:
http://www.easyforexnews.net/uploads/2011/05/EEMEA_weekly_23May11_Hungary.pdf
Gillian Edgeworth / Gyula Toth
UniCredit Research