FXStreet (Edinburgh) – Cristian Maggio, Head of EM Strategy at TD Securities, assessed today’s decision by the CBRT to keep the monetary stance unchanged.
Key Quotes
“My first impression is that the CBRT has fallen short of market expectations. This comes as a natural conclusion even just looking at the market reaction after the document was published. New USDTRY all time high at 2.8941. The pair is now trading just above 2.89 but, unless the CBRT puts some substance to these promises, the lira is unlikely to receive great support going forward.
“I’m not quite sure if the goal is still stabilize the lira or just let it go weaker to help the economic rebalancing. Certainly the CBRT will have to consider the implications for the corporate sector that has large USD exposure via foreign debt. And the fact that Erdogan’s adviser Cemil praised the CBRT’s decision (‘brave’ and ‘appropriate’) shortly after the announcement today, leaves me with that bitter taste of something that doesn’t feel good but you don’t quite get what is wrong with it”.
“For now, we stick to our negative opinion on rates and currency (we see USDTRY to 3.0 in the short term and higher towards 3.30/3.35 in the coming 10 months), on the backdrop of a messy political situation that sets almost certainly Turkey for early elections. Another 5 days to figure that out”.
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