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USD/TRY Breaks 14.00 as CBRT's Will To Defend the Level Fades

TURKEY
  • USD/TRY trades +1.22% higher this morning with the CBRT failing to step in to defend the 14.00 level for a fourth time – sending the cross spiking towards 14.20 as pent-up pressure finally break’s the CBRT’s resolve.
  • Central bank meetings are set to dominate this week’s calendar across the globe.
  • The first obstacle is the FOMC this week with market eyeing an accelerated taper timeline and new dot-plot, which may add hawkish inputs into the FOMC’s reaction function and provide support to the USD – should the MPC continue to sound concerned about the CPI trajectory.
  • Meanwhile, the CBRT is expected to continue with its low rates/high growth approach and lower rates -100bp to 14.00%, with risks to a larger 200bp cut if Erdogan sees this as an opportunity to accelerate his easing push.
  • This should precipitate more TRY weakness in the lead-up with markets anticipating a rise to 25%+ in headline inflation in December.
  • Current account data is expected to see a slight improvement y/y, while industrial production is set for a gain m/m and slight decline y/y.
  • The move above 14.00 gives USD/TRY the next leg higher, eclipsing futile efforts from the CBRT to intervene with its limited reserves.
  • CBRT activity will have to be monitored closely this week for potential intervention, should TRY see aggressive weakness. Next key levels are 14.21, 14.50, 14.80 & 15.00.
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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