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A$ Edges Lower


Export Worry Leaves BofA Wary


Firmer & Flatter


USD/KRW Pushes Back Above 1300

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  • USD/TRY spikes higher overnight to peak at 8.80 before retracing back to the 61.8% fib level at 8.6275 after Erdogan said he had spoken with CBRT Governor about lowering rates, citing the July-August Period.
  • This concerning shift back to market inappropriate policy is precisely what markets have been expecting since former Gov Agbal's removal, and comes ahead of a higher expected inflation print tomorrow.
  • This dovish shift is a major negative for CBRT credibility, de-dollarisation and TRY stability – which is likely to become untethered now that Erdogan has provided forward guidance towards the first cuts.
  • This July-August period comes ahead of most expectations for a cut cycle with most sell-side forecasting 3Q-4Q21 and comes towards the front of our base case zone outlined at the previous meeting (3Q21).
  • Failure to deliver cuts in the near-term will likely result in further staff turnover at the CBRT and even lower credibility in the eyes of the market.
  • The direction of travel for USD/TRY is more decisively upwards towards 9 on confirmation of market fears of premature rate cuts.
  • Intraday Sup1: 8.6126, Sup2: 8.555, Res1: 8.6635, Res2: 8.7492, Res3: 8.8008


MNI London Bureau | +44 020-3983-7894 |
MNI London Bureau | +44 020-3983-7894 |

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