The Turkish lira came under new pressure after Erdogan point out possible rate cuts in the future. While it may be a bit early, the economists at TD Securities they stick to their call for a 100 basis point cut this month with a total reduction of 350 basis points for August. This should keep the USD/TRY well supported in the coming weeks towards the goal of 8.85 by the end of the third quarter.
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“The TRY came under new pressure after President Erdogan alluded to the possibility of cutting rates between July and August. It is unclear whether Erdogan has established this as a precise time for the CBRT, or rather a suggestion of ‘at this time’. “
“We continue to stick to our forecast for a first cut (-100bp) in June. It is true that this may be too early, but we also forecast cuts in July and August, with a total reduction of 350 basis points for August ”.
“While time remains the most uncertain variable in the Turkish equation, Erdogan’s call for rate cuts does not take us too much by surprise. This is even in line with our expectations given our USD / TRY forecast of 8.50 in the second quarter and 8.85 in the third quarter. “
“Once again, the timing and magnitude of FX moves are difficult to fully understand. But the direction of the pair and the events that can trigger the moves are more or less unfolding, as we’ve been calling them for some time. “
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