Fidesz won a two-thirds majority in Parliament on Sunday, which was the most positive scenario, according to analysts. While the landslide victory is no surprise in view of the outcome of the first round two weeks ago, it is definitely a favourable development with respect to Hungarian asset prices.

The unprecedented majority gives Fidesz a very strong mandate to carry out structural reform measures without fiscal laxity and subsequently boost potential growth, keep the budget deficit in check and set the government debt on a lastingly declining path.

Hungary’s forint firmed to around 262.50 against the euro from 263.50 late on Friday. The HUF is currently quoted at around 196.50 to the USD, stronger than late on Friday (197). Against the Swiss franc, the HUF firmed to 182.80 from 183.50 in still illiquid trade. Leading European futures stock indices are up by about 1%, which is seen as another driving force behind the forint’s appreciation.

The Monetary Council of Hungary’s central bank (NBH) will hold a policy meeting today. As the Fidesz victory helps reduce Hungary’s credit risk, the MPC has yet another argument to cut rates by another 25 basis points to 5.25% today. However, some rate-setters will still probably argue for a 50-bp monetary easing."

Source: Portfolio Online Financial Journal