Turkey on the spot

Today will see action by the Central Bank of Turkey, expected to increase the one-week repo rate by 3.25% to 21%. Any smaller increase would trigger another sell-off in the Turkish lira, which could bring USD/TRY back above 7.0. After falling 1.35% yesterday, USD/TRY edged higher to 6.38 this morning, up 0.52%. Signals from the option market suggest that investors are not unnerved. The 1-month 25 delta risk-reversal measure is stable at 8.7% - compared to 1.6% in mid-August – while the 1-month ATM implied volatility stands at 34% - compared to 61% a month earlier.

The Bank of England and the European Central Bank will also make announcements today, but not critical ones. The BoE and the ECB will hold rates steady at 0.75% and 0.0%, respectively. We may see changes of tone regarding economic outlook, but both central banks will avoid hawkishness.


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This report has been prepared by AC Markets 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 AC Markets personnel at any given time. ACM 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.