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TRY Welcomes Hawkish CBRT Rhetoric, but Markets Question Inflation Forecasts

TURKEY
  • USD/TRY trades mostly flat around the open having found support at 8.15 in yesterday's session as rising US Treasury yields put EM FX under pressure across the board.
  • CBRT Gov Kavcioglu came out with a hawkish presser yesterday, pledging to keep policy tight and upgrading year-end inflation forecasts to 12.2% (well below sell-side estimates in the 13-14% range.
  • He also forecast a cyclical peak in inflation in April at 17-17.5%, which many see as more likely to materialise in May/June and be in the 18-19% range.
  • While markets took this meeting as a net-positive, a substantial credibility deficit in the CBRT means words will need to be backed by actions
  • and until such a point, markets will remain biased towards the expectations for a premature easing cycle (JPM estimates first cut in September).
  • Beyond inflation, Cyprus talks saw little progress as was broadly expected with both sides failing to budge and the UN outlawing the two-state solution.
  • Overnight warnings from Blinken RE S-400 purchases and additional CAATSA sanctions are noteworthy, given earlier this week, the MHP said S-400s must be activated.
  • Two consecutive spinning top candles formed on the daily chart with longer downside wicks give USD/TRY a slight bullish technical bias, but we will need to see a daily close above 8.30 to confirm a resumption of the uptrend.
  • Intraday Sup1: 8.1828, Sup2: 8.1618, Res1: 8.2458, Res2: 8.2828
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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