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Lira Treads Water Ahead of Expected Pause on Rate Cuts from the CBRT

TURKEY
  • USD/TRY trades +0.03% higher this morning, broadly in line with price action in the BBDXY.
  • The CBRT is expected to keep rates on hold this week, bringing its easing cycle to an end at -500bp.
  • Inflation remains the key issue at 36.08% y/y and is expected to rise to 40-50% in 2022 on delayed FX passthrough and recent credit boosting measures from government.
  • Discussion on inflation will be monitored closely in the statement, but will likely still be deemed as transitory and due to supply-side factors.
  • Demand for FX-linked deposits remains tepid, which may force govt to pursue more forceful measures similar to the 25% revenue conversion imposed on exporters in the coming months as Erdogan continues to avoid rate hikes.
  • Widening negative real rates and a tightening external backdrop with almost 4 Fed hikes priced in should keep Turkish assets on the backfoot this year. USD/TRY remains in a wide range (13.20-13.9356) ahead of the meeting.
  • A move through 13.682, should open up the prior Jan highs just shy of 14.00, while key support is defined at 13.20.
  • Intraday Sup1: 13.4539, Sup2: 13.3113, Res1: 13.682, Res2: 13.749
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
BulletEM BulletEmerging Market NewsHomepage
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
BulletEM BulletEmerging Market NewsHomepage

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