Macro commentary by etoro analyst for Romania, Bogdan Maioreanu
A Weaker Euro, a Weaker Leu: Political Uncertainty Shapes Currency Markets
The Euro has depreciated against the US dollar in the last week, reaching around 1.12, a value not seen since May 2025. The European currency is under pressure as the gap between the 10-year US Treasuries and German government bonds has widened to more than 1.8 percentage points from 1.4 in early September. This is boosting the appeal of dollar assets amid expectations of tighter US monetary policy and a weaker euro-area economy. Political uncertainty and strained public finances in France, along with the snap election in Spain, are increasing doubts about the stability of the euro area.
In Romania, the leu began to depreciate against both the euro and the dollar last week, with the rate reaching 5.34 against the euro on Friday and 4.75 against the dollar on Friday due to uncertainties from the extended political crisis and rating agencies’ decisions. On Tuesday, the leu continued its slide, with the exchange rate falling to 5.35 against the euro and 4.76 against the dollar. The Bucharest Stock Exchange is also suffering, with a drop of 7% in the last month. Markets sighed in relief after S&P maintained Romania’s investment-grade rating on Friday, but the relief may be short-lived as the political crisis continues, and the lack of a government is raising questions regarding the direction of the country and whether budget stabilization reforms would continue. However, the reprieve was extremely evident in the Bucharest Stock Exchange, where the BET index gained over 4% on Monday. Now the markets are looking toward the National Bank of Romania rate decision this Thursday, with a rate cut seeming unlikely despite the ongoing recession, as inflationary pressures persist in the Romanian economy and the leu’s drop is making key imports such as fuel more expensive.
A global bond selloff is hitting France particularly hard, as investors worry about missed deficit targets, policy paralysis and next year’s presidential election. Rather than narrowing toward the planned 5% of GDP, the budget deficit is worsening, pushing French borrowing costs sharply higher. France’s 10-year bonds just posted their worst quarterly performance since the euro was introduced, while the spread over German bunds reached 152 basis points on Friday – the widest since 2011.
Spain’s November 29 snap election adds a new layer of uncertainty for European markets, with potential implications for sovereign debt, risk premia and economic-policy expectations. While Spain enters the election campaign in a relatively stronger fiscal position than France or Italy, public debt remains close to 101% of GDP, leaving the country exposed if pressure on peripheral euro-area bonds intensifies. Investors will be watching banks, given their sensitivity to sovereign yields; renewables and utilities, for any shift in climate-policy priorities; and defense stocks, should a newly elected government favour higher spending. The election does not fundamentally change the investment case for Spanish equities, but it introduces volatility that markets will need to price in, making bond spreads, risk premia and the IBEX’s relative performance versus European peers’ key indicators in the weeks ahead.
Taken together, these developments show how political uncertainty and fiscal pressures are shaping European currencies and markets. The euro’s weakness against the dollar and its strength against the leu reflect different vulnerabilities, while Romania’s market rebound suggests relief rather than a lasting return of confidence. In the weeks ahead, central-bank decisions will remain important, but restoring political stability and confidence in public finances will be essential to easing pressure on currencies and borrowing costs.
Bogdan Maioreanu, eToro analyst and markets commentator, has over 20 years of experience in financial services and investments and a strong background in journalism. He held different Corporate Banking management positions in both Raiffeisen Bank and OTP Bank, before moving to business consultancy roles working for IBM Romania, among others. Bogdan is an Executive MBA from Asebuss and Washington University.
