19 Feb 2015
Mixed prospects for the Turkish lira in 2015 – Danske Bank
FXStreet (Edinburgh) - Economist at Danske Bank Vladimir Miklashevsky reviewed this year’s perspective for the lira.
Key Quotes
“As inflation is slowing and parliamentary elections approaching (7 June), political pressure on the economic authorities has been building”.
“The central bank surprisingly announced it is ready to cut rates any time. The declaration sent the lira around 4% lower against the USD within a week in February”.
“Improving macro fundamentals have created solid upside for the lira in early 2015 which has already been seen in better industrial production numbers and real sector confidence”.
“However, the improvement seems to have been offset by the deteriorating credibility of monetary policy and political pressure”.
“A Fed rate hike could also trigger a run in EM and Turkey assets, raising the risk of a sovereign rate cut on sharply rising uncertainty in the Turkish economy. All the latter is lira negative”.
Key Quotes
“As inflation is slowing and parliamentary elections approaching (7 June), political pressure on the economic authorities has been building”.
“The central bank surprisingly announced it is ready to cut rates any time. The declaration sent the lira around 4% lower against the USD within a week in February”.
“Improving macro fundamentals have created solid upside for the lira in early 2015 which has already been seen in better industrial production numbers and real sector confidence”.
“However, the improvement seems to have been offset by the deteriorating credibility of monetary policy and political pressure”.
“A Fed rate hike could also trigger a run in EM and Turkey assets, raising the risk of a sovereign rate cut on sharply rising uncertainty in the Turkish economy. All the latter is lira negative”.