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- USD/TRY opens -0.22% lower this morning with markets relieved that Erdogan fell short of making more destabilising comments regarding CBRT policy and inflation in his evening address.
- The cross traded choppily following yesterday's US CPI miss, failing to strengthen in line with high-beta peers RUB & ZAR owing to light pre-CBRT positioning and concerns over Erdogan's speech.
- Today's focus shifts to the CBRT where broad expectations align with a hold on rates at 19.00%, despite rapidly rising CPI.
- While the CBRT may shift its guidance to convey maximum hawkishness, the market has set a high bar for any material shift in expectations for premature easing against market conditions in the coming months.
- Although the predominant expectation is for a hold at this meeting, there may be some pre-emptive pricing in of a cut that could cause some post-statement gyrations in USD/TRY and local bonds – but nothing too major at this juncture.
- Our base case, however, remains for markets to favour fading TRY strength in the coming months as the CBRT reaction function becomes more dovish.
- Intraday Sup1: 8.5875, Sup2: 8.5516, Sup3: 8.5516, Res1: 8.6399, Res2: 8.6712, Res3: 8.7092