Danske Research Team
Danske Bank A/S
Elections are likely to produce another hung parliament and hence a challenging political environment, with the AKP failing to regain a majority according to our reading of recent polls.
A coalition government is in our view likely in such a situation, potentially consisting of AKP and CHP.
If the economic team of such a coalition government is pro-reform, market sentiment could be favourable going forward, which could support the lira. If not, market perception would remain negative even with a coalition government.
However, given mutual distrust between parties, a continuing political stalemate cannot be precluded.
If political stalemate continues, the Turkish currency would remain highly vulnerable, especially as the Fed hike approaches.
A coalition government is in our view likely in such a situation, potentially consisting of AKP and CHP.
If the economic team of such a coalition government is pro-reform, market sentiment could be favourable going forward, which could support the lira. If not, market perception would remain negative even with a coalition government.
However, given mutual distrust between parties, a continuing political stalemate cannot be precluded.
If political stalemate continues, the Turkish currency would remain highly vulnerable, especially as the Fed hike approaches.
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