Piotr Matys, EM FX Strategist at Rabobank, notes that the Turkey’s inflation has surged to a 15-year high of 15.39% y/y in June from 12.15% in May as inflationary pressure is mainly fuelled by the precipitous fall in the value of the lira in previous months accompanied by higher global oil prices.

Key Quotes

“Given that inflation is set to stay well above the official 5% target until well into 2019, the bias remains firmly skewed in favour of the CBRT tightening monetary policy to prevent significant deterioration in inflation expectations. So far this year the central bank has raised rates by 500bps in total.”

“A further rise in producer prices to 23.71% y/y in June is also a major negative signal for Turkish policy makers. The prospect of the CBRT raising rates on July 24 should prevent USD/TRY from regaining the upside traction in a sustainable way.”

“The downside in USD/TRY is constrained by prevailing risk of global trade wars. The cautious approach towards Turkish assets can be also attributed to market concerns about the central bank’s independence.”

“While the emergency hike of 300bps on May 23 followed by higher than expected 125bps move on June 7 proved that the CBRT can act decisively, it will take time to restore confidence amongst foreign investors. Another rate hike on July 24 would be yet another important step in the process of rebuilding central bank’s credibility.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

Latest Forex News

Latest Forex News

Editors’ Picks

EUR/USD falls toward 1.19 after robust US Nonfarm Payrolls data

EUR/USD is trading above 1.19 after dipping below that number in response to the US Nonfarm Payrolls, which showed an increase of 379K jobs in February. Higher yields in response to Powell are keeping the dollar bid.


GBP/USD recovers after post-NFP dip below 1.38

GBP/USD is trading above 1.38 bus till down the day. The US gained 379.000 jobs, roughly double than expected and supporting the dollar. The Senate's stimulus debate is eyed.


XAU/USD battles 1700 level

Gold is staging a rebound toward $1,700 amid proift-taking ahead of the weekend but remains on track to close the third straight week in the negative territory.

Gold News

Ethereum price primed for a swift recovery as the network prepares for a major update in July

Ethereum price aims for a significant recovery towards $2,000. A major upgrade scheduled for July intends to fix the problem with gas fees on Ethereum. ETH miners are not happy with the decision.

Read more

US Dollar Index pushes higher to 92.20 on stellar Payrolls

The march north in the greenback remains unabated and trade in fresh 2021 highs beyond the 92.00 hurdle when tracked by the US Dollar Index (DXY).

US Dollar Index News