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4 Sep 2015
TRY remains under pressure – BAML
FXStreet (Edinburgh) - Analysts at BAML expect the Turkish lira to remain heavy against the backdrop of political unease.
Key Quotes
“The pressure on TRY and Turkish assets puts the case for an emergency MPC back on the table, in our view”.
“While we agree with the need for such a hike, we do not expect CBT to deliver that for four reasons. First, TRY and Turkish assets have partly moved along increased political and security concerns and they are out of CBT’s reach with monetary policy. Second, the economy is already weak as the run rate of GDP came below 2%. Third, FX weakness is a common theme right now across EM. Last but not least, CBT lacks strong political support behind it to take bold action, unlike Jan’14”.
“Political uncertainties are likely to keep TRY weak despite support from lower oil prices and global interest rates. Scope for any recovery hinges on political resolution and more orthodox tightening steps from CBT”.
Key Quotes
“The pressure on TRY and Turkish assets puts the case for an emergency MPC back on the table, in our view”.
“While we agree with the need for such a hike, we do not expect CBT to deliver that for four reasons. First, TRY and Turkish assets have partly moved along increased political and security concerns and they are out of CBT’s reach with monetary policy. Second, the economy is already weak as the run rate of GDP came below 2%. Third, FX weakness is a common theme right now across EM. Last but not least, CBT lacks strong political support behind it to take bold action, unlike Jan’14”.
“Political uncertainties are likely to keep TRY weak despite support from lower oil prices and global interest rates. Scope for any recovery hinges on political resolution and more orthodox tightening steps from CBT”.