Review

  • Turkish political tensions seem to back on the agenda in Turkey. The newspaper Taraf stated in an article that a new court bid to ban the ruling AK Party could be launched as soon as Friday. Furthermore, on Thursday afternoon, Turkish police detained around 20 people, including retired and active military officers, in connection with the alleged plot against the Turkish government.

  • Yesterday, the Polish Minutes from the last monetary policy setting meeting in February were published. They showed that the MPC members were fairly split over the outlook for Polish interest rates, specifically about the timing of monetary tightening. The MPC also pointed to a high uncertainty regarding the pace of recovery and the impact on inflation. We still expect a 25bp rate hike in Q3-Q4.


Preview

  • The calendar is very thin in terms of economic data today.

Trading update

  • A setback in risk appetite on the back of renewed concern about the EU’s ability to deliver any specific rescue plan for Greece and increasing probability that Greece would have to ask the IMF for rescue package, were reflected in the performance of the EMEA FX markets on Thursday. The Polish zloty was further affected by another verbal intervention by the Polish central bank which stated that further zloty gains could delay interest rate hikes. Furthermore, another round of political tensions in Turkey weighted negatively on the Turkish markets yesterday.

  • The market reaction to Latvian political jitters has been limited and we have not seen any spill-over into other CEE markets so far. We, however, recommend investors to be cautious in regard to possible upside risks to other CEE markets. We furthermore recommend investors to stay on the sidelines with regard to the Turkish markets, given the increased political risk.