TRY: USD/TRY Reaches Fresh Record High, Attention on CBRT Inflation Report

The rebound in the greenback and risk-off tone across markets has kept topside pressure on USD/TRY, which is trading at fresh record highs today. Furthermore, offshore TRY overnight rates have spiked to 55% earlier today - their highest level since March - suggesting a decrease in long lira positions held abroad.

• Treasury & Finance Minister Mehmet Simsek said in an interview this morning that Turkish inflation will continue to fall in August, reaching around 40% by year-end. That is in-line with previous comms. Greater focus will be on the presentation of the CBRT’s latest inflation report on August 8, with any potential tweaks to the central bank’s inflation forecasts closely eyed.
• As a reminder, data yesterday showed headline inflation fell to 61.8% in July from 71.6% in the previous month, the sharpest drop in close to two years. Further significant declines are expected due to base effects.
• Meanwhile, BofA sees room for Turkey to cut the policy rate from the current 50% in December, though continue to expect the central bank to be cautious. They add that the timing of cuts are dependent on data, but say there is room to test waters by removing some of the macroprudential measures before rate cuts.