Emerging markets rundown: September to bring volatility?

The dog days of summer are winding down once again, though volatility in the forex market may not pick up until next week’s start of September data deluge.

In the G10 FX space, most traders will be focused on U.S. Durable Goods orders (Tuesday) and Eurozone CPI data (Friday), but there are three potentially market-moving announcements in the more widely-traded EM currencies as well.
 

USD/ZAR: Will Q2 GDP recover?

After collapsing in the wake of widespread mining strikes in Q1, South Africa’s Q2 GDP report (Tue) is expected to show modest improvement. Analysts and economists are expecting that the report will show 0.9% quarter-over-quarter growth after Q1’s 0.6% contraction; year-over-year growth, meanwhile, is expected to clock in at 1.2%.

On a technical basis, USD/ZAR (not shown) has been trapped within a tight range from 10.55-10.80 since the start of June, and with rates currently near the middle of that range, only a big surprise in the GDP reading is likely to shake the pair out of its well-trodden consolidation zone.

 

USD/HUF: Hawks to be left hungry?

Meanwhile in Hungary, the central bank is widely anticipated to leave interest rates unchanged at 2.10%, officially marking the end of its long easing cycle. For 24 consecutive meetings over the last 2+ years, the Magyar Nemzeti bank cut interest rates by between 0.10% and 0.20%, taking its main interest rate down from 7.0% to just 2.1% over that period.

With both inflation and GDP figures improving markedly in July, the central bank is likely to leave interest rates unchanged. Despite the likely end of easing, the Hungarian forint continues to sell off against the U.S. dollar, with the USD/HUF (not shown) pressing against a 25-month high in the 2.3850 zone. A dovish statement could cause this pair to break that key barrier, potentially opening the door for further gains toward 2.45 as we head into September.

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