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USD/TRY Breaks 15.00 as Erdogan Fires Officials, CBRT Looms

TURKEY
  • USD/TRY trades +2.13% higher this morning on the back of further staff turnover in the Treasury, denting sentiment ahead of today’s CBRT.
  • Last night’s FOMC outcome had little bearing on the cross which continues to trade on its own and in one direction – higher.
  • After an initial push higher post-FOMC, the USD cratered, bolstering global risk conditions into the end of the session. As expected, the MPC doubled the pace of its taper, but signalled 3 hikes come in 2022 in a hawkish tilt that acknowledges the end of the ‘transitory’ period of inflation.
  • Moreover, the Fed upgraded its end-2022 inflation forecast to 2.6% vs 2.2% - adding more hawkish elements to the meeting.
  • Today’s focus shifts to the CBRT meeting, where the bank is expected to reduce rates by a further -100bps to 14.00% directly into oncoming CPI headwinds.
  • More deeply negative real yields against an expected surge in inflation to 25% in Dec & 30-32% in 1H22 and a tightening external environment makes TRY extremely vulnerable to further depreciation over the medium-term.
  • Sell-side analysts believe the CBRT will eventually be forced to deliver rate hikes to re-establish positive real rates.
  • However, Erdogan may opt fore more unconventional policy tools combined with the continued burning of reserves to stabilize the currency first.
  • Intraday Sup1: 14.759, Sup2: 14.4943, Sup3: 14.1811, Res1: 15.2853, Res2: 15.50, Res3: 15.75
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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