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- USD/TRY trades slightly higher this morning, having pulled back from the 8.50 handle in early trading.
- Renewed interest in local bonds helped spur a strong performance last week to close out an impressive month for TRY as the leading CEMEA currency.
- Over the weekend tensions flared with Turkey summoning the Greek ambassador over an alleged shooting of a Turkish citizen – which may spark more difficulties between the two as the issue develops.
- Moreover, covid cases continued to rise – breaching the 20k/day mark on Sunday.
- This week, however, the focus will be on CPI data due tomorrow with expectations for a substantial rise to 18.6% from 17.5%.
- This could dent recent optimism in TRY assets with carry potential being dramatically reduced and the CBRT unable to tighten policy further, given Erdogan's pressure to keep policy as loose as possible.
- Sell-side sees CPI reaching up to 19% in the coming months, which places Governor Kavcioglu in a tricky spot should price pressures exceed this number, given his pledge to keep rates above inflation.
- Intraday Sup1: 8.4381, Sup2: 8.40, Res1: 8.4875, Res2: 8.524