The HUF has been south of the psychologically key level of 280 versus the euro since last Thursday. But the Hungarian currency failed to firm markedly party as a result of the capricious global investor sentiment and the proximity of the important technical EUR/HUF resistance level at 276.50. The HUF approached 200 to the Swiss franc and eased to above 211 from 210 against the greenback on the interbank market today.

Societe Generale said in a research note today that a cautious view on the HUF remains warranted.

"The central bank’s threat to raise rates if needed and improved risk appetite provided some relief for the HUF. We nevertheless keep a very cautious view on the currency, as any turnaround in risk sentiment could send EUR/HUF back towards 290," SocGen said.

The Federal Reserve’s rate decision (due at 20:15 CET today) and the statement that will follow the announcement will be a key mood-setter on global money and capital markets. Investors await the central bank’s latest macroeconomic forecasts (with GDP estimates likely to be adjusted downward) and any signal that the Fed would further ease its already extremely loose monetary policy.

After the June 22-23 meeting, the FOMC said the "economic recovery is proceeding" and the labour market "improving gradually." Since then, there have been two straight weak jobs reports, new evidence that both industrial output and retail sales are growing at a slower pace, and disappointing data on Q2 growth.

Markets were yesterday pricing in a high chance of looser monetary policy emerging from the central bank's Federal open market committee (FOMC) meeting tonight as concern mounts about the jobless recovery in the US.

Stock markets around the world rose on hopes of a boost to the world's largest economy, with the FTSE 100 index in London ending the day 78 points higher at 5410, a gain of 1.47%. Some economists, however, believe the Fed will hold fire for now."

Source: Portfolio Online Financial Journal