Turkey in a state of emergency - TDS

Cristian Maggio, Head of Emerging Markets Strategy at TD Securities, notes that the Turkey’s cabinet decided to propose a State of Emergency (SoE) after a recommendation from the State Security Council yesterday.

Key Quotes

“Final approval at the Grand National Assembly, Turkey’s parliament, is still pending.

Given the AKP dominance of the Grand Assembly, we expect the measure to be approved swiftly. This will enable the government to rule by decree for three months, limit freedom of press and other constitutional liberties, and grants provincial governors extraordinary powers.

After the S&P announcement, USDTRY hit an all time high at 3.0973. Today, the lira has appreciated by 0.7% to 3.0690, but remains near historical lows and prone to further selloff. We think that USDTRY may move towards 3.50 faster than Q4 2017, and drag rates into a similarly harsh correction.”