...I was chatting with JR about the new safe haven currency in the world-the Hungarian forint. He quipped: "Oh yeah, in times of trouble that's always my go-to currency." LOL ... But if you look at the price action in the forint, and just landed on our fair planet, why would you think otherwise?

USDHUF (forint) versus USDCHF (Swiss franc) Daily:

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This isn’t an issue to disparage the great country of Hungary; but it is to say, borrowing the words of my 3-year granddaughter, “JEEEZE-UH Louise-uh”-- this is getting a bit nutty!

This is from The Wall Street Journal today [our emphasis]:

The National Bank of Hungary lowered its forecast for the country’s gross domestic product growth to 2.9% this year and to 3% next year as domestic consumption is in the doldrums, the bank said in its quarterly Inflation Report Wednesday. “The forecast isn’t as optimistic as it has been so far, but that’s not due to the new methodology, rather a result of worse-than-seen banking sector lending activity,” said Janos Samu, economist at Concorde Securities.

Although the report was prepared under a new methodology and its key figures aren’t comparable with earlier forecasts, the difference is still striking: the central bank earlier expected the Hungarian economy to grow 3.1% in 2011 and 4% in 2012. “Even without the Hungarian government’s budget savings measures, economic growth would have been more muted than in our previous forecast. The government’s savings measures will further slow the country’s GDP growth in the short run, but if the measures are fully implemented, growth will accelerate in the longer run,” Barnabas Virag, the bank’s senior economist, told reporters at the time of the publication.

Okay…not a disaster. But words such as “lower growth” and “doldrums” aren’t inspiring given that European banks across-the-board are less than inspiring. Hungary is still highly dependent on external funding. The ECB is going to hike rates, Ireland is going to need more cash, Portugal is teetering into the rescue pond, and the so-called banking stress-test looms in the balance.

Portugal vs. Germany 10-year bond spreads…another fresh high: Zoom-zoom!

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I realize traders love higher rates. But I still think the ECB is getting way ahead of itself given the basket-case of countries it has to hold together. This rate hike couldn’t be a better example of two-tier Europe—monetary policy for Germany, the rest of the countries “be damned.”

Oh well, baseball and hot dogs today—all is right in the world. But when it isn’t, I want to be long USDHUF because sooner or later it will be “déjà vu all over again” (thanks Yogi).

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