While the French Presidential elections are still taking the major attention from markets, central banks are also coming back. The Turkish Central Bank will likely announce early this afternoon that it will maintain its stance on the rates.
The Benchmark Repurchase Rate should be maintained at 8% to mitigate inflation risk. According to the national Turkish institution, the inflation rate climbed to 11.29 y/y from 10.13%. In addition, the Central Bank Governor Murat Cetinkaya is expected to have a current account deficit of 4% for 2017, which would mean that a recovery is actually happening. Currency-wise, the Turkish lira remains at an elevated level, although not weaker than the level of 3.87 liras at the end of January.
In our view, the geopolitical and political uncertainties are one of the greatest driver of the currency at the moment. President Erdogan won the constitutional referendum and this increases his power and he main remain in office until 2029. Diplomatic relations with the EU though are at a low point. We believe that USDTRY has some room to head even higher in the medium-term.
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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