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USD/TRY Fails to Breach 8.00 After Market Interprets CBRT Statement as Slightly Dovish

  • USD/TRY open higher this morning in line with a choppy Greenback.
  • Yesterday's CBRT printed mostly in line with expectations, with market leaning more on the dovish side in its interpretation of Kavcioglu's statement surrounding the largely expected hold at 19%.
  • Key statements were the removal of guidance towards further tightening (dovish), the pledge to keep rates above inflation (relatively hawkish) but no signal of any easing to come (relatively hawkish).
  • With inflation poised to rise to a cyclical peak of 18-19% in 2021, this could imply a protracted period of holding for the CBRT – counter to Erdogan's wishes for a cut cycle targeting single-digit rates.
  • Overall, when you consider Kavcioglu's installation has been purely predicated on bringing rates lower, the outcome becomes relatively more hawkish – given how dovish it could have been.
  • USD/TRY pared the early post-meeting move higher on the back of a softer Greenback before stabilising above 8.00 once more.
  • The meeting would have gone exactly how CBRT would have liked – delivering a relative market stabiliser and seeing no major TRY sell-off.
  • We'll have to monitor comms from both Erdogan and the CBRT in coming months closely for signs of premature easing, which will be largely priced into TRY assets due to the CBRT's credibility deficit.
  • With volatility dissipating and bonds seeing flows tentatively returning, we may see TRY pressure the 8.00 handle in coming sessions but may be capped to the downside around 7.87-7.75.
  • Intraday Sup1: 8.0236, Sup2: 7.9332, Res1: 8.1135, Res2: 8.1793
MNI London Bureau | +44 020-3983-7894 |
MNI London Bureau | +44 020-3983-7894 |

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