Monday, June 7, 2010

Concerns on Hungary's Sovereign Debt

Without much significant data, except for the surprised gain in Germany factory orders, the EUR/USD gained approximately 30 pips from the opening price today. Nevertheless, some worries over the Hungary's sovereign debt market might contribute for weakening of the currency of the euro-zone. Here is a quote from Bloomberg:

Hungary’s domestic politics roiled global markets last week as officials in Prime Minister Viktor Orban’s government compared the country to Greece while claiming the previous administration lied about public finances.

Even though Hungary is not part of the euro-zone countries, their debt issues might very well to follow Greece's path. As a result, fears of possible debt contagion will undoubtedly arise, which will further weaken the EUR and make EUR USD parity very feasible notion. The target for Hungary's fiscal deficit is 3.8% of GDP, however current data suggests that the number might well be above 4.5%. The Hungarian government made the statement that it will do "everything" to adhere to the deficit limit set out by the EU/IMF, however, there are many obstacles that the country will have to overcome, one of which is the battered state of the economy that Hungary is in.

Luong T. Hai
Summer Analyst
Analyze Capital LLC

1 comment:

  1. I like this update a lot as we don't touch upon Eastern Europe as much in our discussions. At this rate do you really thing Parity will occur?


This Blog has been developed by Analyze Capital LLC, and as an independent organization we provide “AS IS” information without warranty. The ideas and opinions expressed by the contributers of this blog are personal and do not represent the actions or policies of Analyze Capital LLC. The contents of this blog do not intend to assert recommendations or to offer advice of any kind. We are not responsible the consequences, be they gains or losses, that may result from using any of the information from this blog.