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TRY Still a Brightspot in EM, but Constitution Risks Brewing

TURKEY
  • USD/TRY opens marginally higher in line with a firmer greenback.
  • Yesterday's upside surprise to CPI saw a slightly more muted effect than expected, dampened by assurances for further tightening if conditions deteriorate further.
  • Choppy $ trading keeping broad EM inflows on the backfoot in the short-term, but TRY still remains a brightspot among the high-yielders, despite seeing carry potential slightly eroded with yesterday's CPI print at 14.97%.
  • Concerns about Erdogan's intentions to change the constitution are a brewing tail risk, but aside from this, the local scene is relatively subdued.
  • For now, TRY should remain at the mercy of global risk sentiment and $-side factors, but rate hike concerns may start to creep in over the next few months if upside surprises in CPI persist.
  • Catalysts are needed from the $ side on risk-on sentiment to see USD/TRY drift towards Sup1: 7.0699 & Sup2: 7.00, Res1: 7.2015, Res2: 7.2792
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com

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