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CBRT Faced With Limited Options, May Deliver Market Stabiliser

TURKEY
  • USD/TRY opens slightly higher, pulling back some of the downside gained post-US CPI yesterday.
  • The introduction of a partial lockdown has seemingly had a marginal impact on price action, with TRY sitting out early $ weakness as cases skyrocket to 60k/day.
  • Reassurance from Erdogan's Aide Bulut that tomorrow's CBRT decision will be in line with market conditions (implying a potential hold), complemented by assurances from Kavcioglu against a premature easing cycle should soothe TRY nerves somewhat today.
  • With little other option, markets are expecting a market stabiliser in the form of a relatively hawkish hold at tomorrow's meeting in continuation of Agbal's stance, but likely falling short of guiding towards more tightening.
  • Pressure from Erdogan has ruled out any tightening and a cut at this juncture would be the nuclear option for TRY amid rising CPI & TRY weakness – leaving little option other than a hold (detailed MNI CBRT Preview due today).
  • However, as we know with the CBRT -we must always expect the unexpected and risks of a premature cut cannot be fully discounted and will likely be partially priced into TRY assets.
  • CBRT expectations & $-side developments will likely be the key price action driver today.
  • Intraday Sup1: 8.1135, Sup2: 8.0236, Res1: 8.1793, Res2: 8.2046
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
BulletEM BulletEmerging Market News
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
BulletEM BulletEmerging Market News

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