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- USD/TRY trades mostly flat around the open after broad-based risk off and a stronger BBDXY moved the cross higher towards 8.60.
- With limited data on the agenda today, the cross should track global risk sentiment and may be sensitive to developments in Northern Cyprus.
- Erodgan is set to conduct his second day of touring around the TNRC and is expected to open a mosque in the controversial city of Varosha, which the EU will be watching closely.
- Yesterday, Erdogan fanned tensions with the West by voicing support for the two-state solution and announcing construction of a presidential complex to show a more tangible Turkish presence on the island.
- The EU has previously said that the establishment of further infrastructure and the re-opening of Varosha would be deemed inflammatory – and will be monitored closely today.
- TRY continues to perform relatively well vs its EM peers, given high rates of carry and reduced dovish drivers in CBRT policy.
- TRY should continue to do relatively well so long as rising inflation keeps Erdogan's pressure to cut rates at bay, but this still remains just a matter of time before the first cuts are called for with the current consensus being 4Q21.
- Intraday Sup1: 8.5633, Sup2: 8.5419, Res1: 8.6106, Res2: 8.6399