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Firmer TRY Eyes CBRT Gov Kavcioglu's First Quarterly Inflation Report & Q&A

TURKEY
  • USD/TRY trades slightly lower at the open as markets await CBRT Gov Kavcioglu's first quarterly inflation report and Q&A session (0830BST).
  • With the year-end inflation estimate likely to see a strong upside revision, Kavcioglu will try to soothe markets with promises of keeping rates above inflation.
  • However, markets are broadly seeing through this and anticipating a premature easing cycle in line with Erdogan's insatiable appetite for single-digit rates.
  • Expectations for a cyclical peak in inflation at 18-19% puts the CBRT in the vexing position of not being able to tighten for political reasons or ease for economic reasons
  • leaving an extended hold as the most feasible scenario amid acute TRY weakness and low CBRT credibility.
  • With Kavcioglu unlikely to highlight any more tightening in the pipeline, we may see this weigh on TRY, which has stalled out around the 8.17 zone vs the $.
  • Cyprus talks have hit an inevitable brick wall over the two-state solution with the UN snubbing the proposal, which may see talks dissolve or tensions escalate into the final day of negotiations.
  • Yesterday's FOMC came through exactly as predicted, pushing aside inflation and tapering risks and highlighting a strong US recovery - supporting risk markets and some mild downside in USD/TRY.
  • Intraday Sup1: 8.1793, Sup2: 8.1135, Res1: 8.2046, Res2: 8.2538
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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