Politics stirs the currency market. Forint and leu at two poles

Politics is dealing the cards again on the Central and Eastern European currency market. While the Hungarian forint (HUF) awaits credible fiscal plans of the new government, the Romanian leu (RON) is buckling under the weight of the coalition's collapse and the no-confidence vote, according to the latest report published by UniCredit.

From the report published today by The Investment Institute at UniCredit bank, we learn that in the shadow of global turmoil related to energy prices, local political factors currently remain the main driving force on the currency market in our region.

Hungary: Markets are looking at the new government and EU billions

In Hungary, investors' attention is focused on the new government, which is scheduled to be sworn in on May 9. Two factors will be crucial for the future forint quotations: progress in securing access to the EU Reconstruction Fund before the end of August deadline and the administration's new fiscal plans..

The report's authors assess the situation of the Hungarian currency with moderate optimism: “Although global headwinds have halted the post-election HUF rally, we still see room for the EUR-HUF rate to catch up with its regional peers if the new government presents credible fiscal convergence plans.”

Analysts recall that the forint clearly performed worse than the region's currencies in 2020-2024, but this trend began to reverse at the beginning of 2025 thanks to the new management of the Central Bank (NBH), which placed greater emphasis on currency stability.. The April elections further strengthened the forint, pushing the EUR-HUF rate near two-year highs.

However, to sustain these gains in the medium term, credible plans will be needed to support the government's ambitious intentions to adopt the euro. Experts warn that the proposed tax cuts and pension increases will need to involve sustained spending cuts to keep the deficit on a downward path from around 5.6% of GDP in 2026.The Hungarian central bank itself is likely to keep interest rates unchanged for a longer period of time.

Romania: The specter of a political crisis weighs on the currency

The mood is completely different in Bucharest. Political risk in Romania has increased dramatically as a result of the collapse of the ruling coalition and the no-confidence vote scheduled for today, which immediately put pressure on the leu's quotations..

In Romania, the central bank loosened its grip on the RON amid resurgent political risks ahead of today's no-confidence vote,” the report said.

“Sthe situation escalated when the largest coalition party (PSD) withdrew support for the prime minister and submitted a motion of no confidence with the support of the far-right AUR party. In response to these events, the National Bank of Romania extended the EUR-RON exchange rate fluctuation band last week in an attempt to ease market pressure on the currency.. This step is also intended to signal the risk of increased turbulence if politicians fail to maintain support for fiscal reforms..

If today's no-confidence motion passes, political risks will remain elevated, with the specter of downgrades in credit ratings and a negative impact on economic growth.. However, early elections seem unlikely because the Eurosceptic AUR is leading in the polls and the pro-European coalition partners rule out cooperation with this faction.

According to UniCredit analysts, the most likely scenario is the formation of a new coalition under the leadership of a new prime minister. It would maintain a pro-European course, although fiscal consolidation might proceed more slowly. This development of events would allow the Romanian central bank to maintain the EUR-RON exchange rate in the range of 5.10-5.20 until the end of the year, even if market nervousness triggers short-term spikes above the upper limit.

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