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USD/TRY Tracks $-Side Price Action as Local CPI Causes Uncertainty Pre-CBRT

TURKEY
  • USD/TRY lifts +0.3% at the open, tracking dollar-side price action, similar to yesterday's session which saw spot return to 8.2493 support.
  • Broad-based dollar weakness was supported by a softer than expected CPI print (17.14% vs 17.3% exp), throwing the cat among the pigeons with the CBRT & sell-side diverging substantially on their forecasts for the timing of the peak in inflation.
  • CBRT forecasts April as peak in inflation in the 17-17.5% range, while the sell-side sees this closer to June/July in the 18-19% range.
  • While the CBRT is expected to keep rates on hold at 19% this week, an earlier than expected peak in price pressures risks the CBRT initiating a premature cut cycle -as many have been concerned about since Gov Kavcioglu's installation.
  • This makes the May CPI print crucial in determining whether price pressures have peaked or still have further upside in the pipeline, and whether the first cuts emerge closer to July/August than September.
  • Nevertheless, risks to a cut at this meeting are low and the bank will likely use the opportunity (RE softer inflation) to continue its commitments to "tight policy" and bring some more stability to TRY and win back some credibility.
  • IIF fair value predictions close to 9.5, however, do not bode well for TRY sentiment over the medium to longer-term.
  • Intraday Sup1: 8.2498, Sup2: 8.2046, Res1: 8.3006, Res2: 8.3319
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
BulletEM BulletEmerging Market News
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
BulletEM BulletEmerging Market News

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