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CBRT Review (+200bp): Agbal Delivers The Goods - TRY In the Driver's Seat

TURKEY
  • USD/TRY drifts slightly higher at the open on marginal profit-taking post CBRT. Yesterday Gov Agbal delivered a 200bp hike (100bp above market) in a decisive move to rebuild CBRT credibility and re-anchor rising price pressures at a time when the marginal effectiveness of market-aligned hikes was diminishing – as noted in our MNP Preview.
  • This was a much-needed move to re-invigorate the policy tightening drive and deliver key stabilising catalysts to TRY through wider real yield/carry buffers. This was also complimented by decisive hawkish guidance towards further tightening if needed.
  • An interesting component was increased credit growth, despite recent hikes – showing more robust and proactive CBRT research into the drivers of the recent inflation spike which was encouraging. However, inflation is still expected to remain sticky in the next few months with a cyclical peak in April at 16.3% before moderating into the 15% range until ~September before tailing off sharply towards 11% into year-end.
  • This risks seeing Erdogan become more vocal on rate cut pressure, and may undermine some of the CBRT's hard won gains, especially on the currency front.
  • USD/TRY notched lower post-meeting as TRY real-yields soared, making the currency more attractive. This should see many revise targets below the prior reversal zone of 7.30, more firmly towards 7.00 in the near-term.
  • Delivering above market also eschews any questions about CBRT autonomy from Erdogan, and with the EU looking less likely to implement harsh Turkey stance in next week's EU summit – we may have a cocktail of positive near-term catalysts in the pipeline.
  • Intraday Sup1: 7.3113, Sup2: 7.2489, Res1: 7.4167, Res2: 7.4498
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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