Peter A Rosenstreich
Swissquote Bank Ltd
American economic developments are as critical as US-Turkey relations. Today’s report on retail sales is expected to show a 0.4% monthly rise in July. Consumer fundamentals continue to improve, while businesses are driving on domestic demand. Amazon’s Prime Day sale lasted six-additional hours, boosting upside expectations. Spending on food services has risen steadily, industrial production is expected to rise 0.3% monthly in July, manufacturing output excluding autos should improve after a 0.3% rise in the prior month. While President Trump’s erratic trade policy has weighed on manufacturers, demand has firmed, suggesting growth will improve. Net-net: we expect further monetary tightening, which will follow through into treasury yields.
Markets are stable today: sentiment remains cautions, but for now TRY can breathe relief. USD/TRY fell sharply to 5.88, suggesting a coordinated action. The probability of a broader contagion, specifically into Europe, has fallen as financial institutions have time to clean their balance sheets and trade out of worrisome positions. Turkey might have been squarely in international markets, but with rising inflation and rate hikes ahead, USD strength is seeking unresponsive currencies. Central banks with weak foundations and policies unwilling to accept realties will come under pressure. It’s clear which direction the US economy and rates are heading, making USD carry and easy trade.
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This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
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