TRY: Court rulings precipitate constitutional problem – Commerzbank

Yesterday, Istanbul's 45th civil court ordered a suspension of opposition CHP’s extraordinary provincial congress in Istanbul, undermining the authority of the Supreme Election Council (YSK) which had previously green-lit the event after some deliberation (and with some conditions), Commerzbank's FX analyst Tatha Ghose notes.

Lira is depreciating at an annualised 40% rate

"The ruling not only sought to reject the YSK's authority but set a precedent for erosion of judicial hierarchy altogether, as lower courts exert veto power against established electoral processes. The YSK then re-convened after this civil court ruling and announced that the congress could proceed – YSK’s decision is supposed to be final."

"Such judicial developments could usher in a sense of constitutional crisis, igniting market anxiety in an already fraught political landscape. The market's immediate reaction was a sell-off in stocks, with banking stocks sliding by nearly 3% on heightened political risk perception."

"On a basket basis (50% USD, 50% EUR), the currency is depreciating at an annualised 40% rate. Since the latest political crisis broke out, daily FX intervention by CBT and the state banks appears to be back in form; the chart below shows the familiar pattern of sideways movement followed by breach of successive lines of defence. We have highlighted this several times in the past weeks. So far, there is no tendency for the pace of depreciation to calm down. The latest judicial development compounds the risks."