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TRY Bears to Eye Kavcioglu's Tone on CPI for Signs of Premature Easing

TURKEY
  • USD/TRY trades flat around the open in the lead up to today's CBRT, mirroring choppy USD price action.
  • With implied vols and risk reversals mostly subdued around this meeting, given broad expectations for a hold, we may see a slightly muted market reaction today in USD/TRY with the outcome largely priced in.
  • Kavcioglu is likely to try to reinforce as hawkish a stance as the CBRT can muster without insinuating any further tightening to come in a nod to Erdogan – capitalising on April's softer-than-expected inflation print to appear to "continue" Agbal's tightening stance.
  • This could help the CBRT win back some credibility today, however, markets still anticipate a premature easing cycle in 3Q21 and actions will always speak louder than words for the CBRT.
  • Markets will monitor Kavcioglu's tone in addressing the potential cyclical peak in CPI for potential guidance on the first rate cut – this is where the CBRT could trip up its hawkish message by accentuating the peak too adamantly.
  • An overall dovish feel to the meeting would be an unequivocally TRY negative development.
  • Intraday Sup1: 8.3025, Sup2: 8.2493, Sup3: 8.2046, Res1: 8.3597, Res2: 8.3994, Res3: 8.4425
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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