The Hungarian government has reported a notable increase in fuel prices, influenced by global economic conditions and currency fluctuations.

Initially, the Hungarian forint showed signs of recovery against the euro, reaching near the psychological threshold of 410 HUF/EUR midweek, following a weaker start to the week at 414 HUF/EUR.

However, by Friday, the currency had corrected back towards its early-week levels.

Against the US dollar, the forint maintained some strength, closing around 400-401 HUF/USD, improving from over 406 HUF/USD on Monday.

Regős Gábor, lead analyst at Gránit Alapkezelő, noted that while the forint remained weak, one factor contributing to its midweek strengthening was positive retail data, despite industrial performance aligning with expectations and not adversely affecting the market.

Globally, the German economy contracted by 0.2% in 2024 for the second consecutive year, attributed mainly to industrial weakness, a development of concern for Hungary as Germany is its largest trade partner.

Domestically, Hungarian construction output fell by 1.7% compared to the previous year, with inflation increasing to 4.6% in December, surpassing market expectations, as highlighted by Rodic Ádám from the MBH Analysis Center.

Varga Zoltán, senior analyst at Equilor Investment Ltd., emphasized the unexpected inflation figures, noting potential limitations on the Hungarian central bank's ability to continue interest rate cuts.

The next central bank meeting is scheduled for January 28.

Global oil prices began the week at $80.5 per barrel, dipping slightly before rising to $82 and stabilizing around $80-81, driven partly by the outgoing Biden administration’s sanctions against the shadow fleet shipping Russian oil, reducing global supply and pushing prices higher.

The Hungarian Ministry of Economy also pointed out that American sanctions and Ukrainian conflicts are jointly contributing to the increase in fuel prices.

Significantly, these developments compel China and India, major global oil importers, to seek alternative sources, increasing raw material costs and logistics expenses.

In recent months, the price of Brent crude oil saw a near 10% increase.

Regionally, the suspension of the Druzhba and Turkish Stream pipelines due to the Russia-Ukraine conflict places additional strain on Hungary’s energy supply, affecting local fuel pricing.

Hungary imports 20-30% of its fuel, making it sensitive to external market pressures.

The Hungarian government has committed to stabilizing fuel prices domestically to prevent them from exceeding those of neighboring countries, citing average prices recently provided by the European Commission.

Currently, Hungarian petrol prices are marginally lower, while diesel prices slightly exceed regional averages.

Looking ahead, several economic indicators are anticipated to influence the forint's trajectory in the coming week, including German producer prices and the European auto registration data for December, crucial due to Hungary’s significant automotive industry.

Moreover, international attention next week will focus on global events such as Donald Trump’s inauguration, which is expected to impact market dynamics alongside the World Economic Forum in Davos.

The euro-forint exchange rate is currently expected to move within the 405-417 band, with the dollar-forint range anticipated between 395-410.

On the stock market, Hungary’s BUX index demonstrated strong performance, consistently surpassing records and showing resilience amidst mixed performances on international exchanges.

Notable developments included historical highs for OTP and significant mid-week gains for Mol, while Richter and Telekom stocks also saw notable price movements.