A sharp jump is expected at the beginning of the week after the firing of the head of Turkey’s central bank

• Erdogan despite once again being the governor of the central bank after an interest rate hike.
• A change in the direction of central bank policies is expected, which would negatively affect the Turkish lira.
• USD / TRY closed at 7.19 on Friday, it is speculated that it could break 8.00 on Monday.

Following the dismissal of the governor of central bank of Turkey (CBRT), the market’s eyes will be on the Turkish lira. Analysts estimate that an opening could occur with a sharp drop in the currency, leading to a significant gap to the upside in USD / TRY.

The USD / TRY closed at around 7.19 on Friday after two days of major declines. This week the Turkish lira was the best performing currency among the most traded throughout the world, boosted by the central bank’s monetary policy decision to raise interest rates by 200 basis points on Thursday.

The The lira rally is likely to come to an abrupt end on Monday considering the replacement of the central bank. The new governor, Sahpa Kavcioglu, is a critic of the high interest rate policy. This could lead not only to the end of the policy tightening cycle, but also to the recent hikes in interest rates being reversed. In turn, there could be a higher tolerance for inflation, which is close to 15%.

The aforementioned factors are all negative for the lira, both in the short and long term. This leads to speculation about a large devaluation in the Turkish lira. If it materializes, it could transfer the negative climate to other emerging markets.

In a TD Securities report, analysts believe that USD / TRY could easily lose 10-15%. For the opening they see a possible rise of 3 to 5% to 7.50. “The next resistance is the area of ​​7.79 (March 8 high), but then we see a move over 8.00 as very likely in the next few hours or days, depending on the containment measures implemented,” reads the Rabobank report. .