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USD/TRY At Risk of Volatility as Erdogan-Biden Uncertainty Rises

TURKEY
  • USD/TRY trades a fraction higher at the open, having failed to breach 8.30 in Friday's session.
  • TRY appreciated +3.19% vs the USD last week, topping the EM FX charts on pre-emptive expectations of some sort of deal on S-400s and CAATSA sanctions in today's meeting.
  • Markets remain divided on the issue, leaving risks to a sharp unwind in TRY optimism, should a deal not be struck on the missile systems.
  • Key phrasing around admitting Turkey into the F-35/Patriot programme or moving the S-400s to Turkey's Incirlik NATO air base will be vital to monitor.
  • Pressure remains on Biden at home to deviate from Trump's soft position on regional strongmen and have a more active role in the East Med region to curb Turkish aggression against Greece – whom Biden has supported over Turkey on numerous occasions.
  • It's also highly unlikely that Erdogan will drop the S-400s without any promises of Patriot missiles, leaving Turkey without any air defense systems.
  • Nevertheless, uncertainty is high at this meeting and markets have favoured a more optimistic outlook.
  • Admission to the F-35 programme or moving the S-400s to the Incirlik air base would be unequivocally positives for Turkey, but the latter would aggravate relations with Russia substantially.
  • No progress or a hardline stance on S-400s from the US would likely see USD/TRY move back to 8.50 and above.
  • Intraday Sup1: 8.3006, Sup2: 8.2062, Res1: 8.4432, Res2: 8.4851, Res3: 8.5419
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
BulletEM BulletEmerging Market NewsHomepage
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
BulletEM BulletEmerging Market NewsHomepage

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