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Policy Divergence Becomes More Stark as Fed Gears Up for +50bp Hike

TURKEY
  • USD/TRY trades +0.12% higher this morning, trimming some of yesterday’s move lower to test 14.8014.
  • The cross fell -0.49% on the back of broad-based USD weakness and falling UST yields pre-FOMC.
  • Markets will be eyeing USD-side drivers today ahead of the meeting with a focus on the Fed’s appetite to further accelerate hikes in the coming meetings to +75bp or stick with +50bp increments for the next 2-3 meetings.
  • At present, some participants see scope for larger hikes in the period to July with +105bp priced into rates futures.
  • However, the bar for a hawkish surprise at this meeting is set quite high.
  • The lira remains vulnerable to a tightening external environment due to the widening monetary policy divergence, deeply negative real policy rates and high external $-denominated debt stocks and should continue to underperform under these conditions.
  • Domestic CPI is due tomorrow and is expected to rise to 67.80% in April. Intraday Sup1: 14.8014, Sup2: 14.7634, Res1: 14.8531, Res2: 14.8791
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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