The Hungarian forint fell over one percent
to 275.90 EUR/HUF on Monday after the
governing coalition lost the local elections
and news that Prime Minister Gyurcsány will
call for confidence vote leaked at the market.
The Prime Minister himself said at the press
conference in the afternoon that he would
ask parliament to hold a vote of confidence
against him and his programme already on
Friday October 6, which made markets
nervous that the reform-oriented Prime
Minister will be forced to step down and the
reforms will be postponed.
We believe that
Gyurcsány will win the vote, since the ruling
coalition holds majority of 210 seats out of
386 and the confidence within coalition
seems to be firm. In this respect the forint’s
fall might be short lived. On the other hand
opposition threatens mass rally if Prime
Minister fail to resign, which might prolong
the period of political tensions.
Today, the political situation will be again
decisive. We believe that the political tension
will not allow the forint to recover at least
until Friday’s confidence vote.
Forint eased after Sunday’s local election.
(CSOB - Investment research)