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TRY Back To Weakest Performer in August Following CPI Print

TURKEY
  • Last month, we saw that the 'improvement in coordination' between Erdogan and the CBRT has led to a bullish momentum on TRY, which ended up being the best performing currency among the CEEMEA market, up 3% against the US Dollar.
  • However, the trend reversed sharply this month following July CPI print (Aug 3), which came out higher than expected at 18.95% (vs. 18.60% exp.), up from 17.53% the previous month.
  • On one hand, the rise in inflationary pressures should 'push' the CBRT to continue its hiking cycle (CRBT has already raised its benchmark rate by 2% in 2021); on the other hand, rate hikes could sharply lower growth expectations as the uncertainty remains elevated.
  • TRY is down slightly over 1% against the US Dollar since the start of the month; USDTRY is approaching its 50DMA resistance at 8.60, a break above that level would open the door for a move up to 8.80, which represents the pair's all time high.
  • USDTRY found support slightly below the 8.35 level, which represents the 23.6% Fibo retracement of the 6.90 – 8.80 range (2021 low/high).
  • Turkey 5Y CDS has increased slightly this week, up 8bps to 389bps.

Source: Bloomberg/MNI

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