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TURKISH LIRA / U.S. DOLLAR

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Erdogan Does the Lyre In, and Europe Covered by 3rd WaveThe main event on Monday to be discussed in the financial markets was the dismissal of the next head of the Central Bank of Turkey. Erdogan has finally found a man who believes that high interest rates are the main reason for inflation and has rushed to appoint him to the post of head of the Central Bank. The reaction of the Turkish lira (the fall was measured in double digits) and the Turkish stock market suggests that the markets have decided to put a final end to Turkish assets as objects of interest. We wish good luck to Erdogan in the difficult task of finishing off the Turkish economy and will continue to watch the rise in inflation and the fall in Turkey's GDP. With this kind of leadership and managerial moves, it looks almost inevitable. Europe, meanwhile, is covered by the third wave of the pandemic. The British strain was extremely contagious and punished any attempt to mitigate lockdowns. As a result, we have both the rejection of mitigations and the new restrictions' extension or introduction against the background of the maximum number of cases for all time in a number of countries. Germany, for example, is preparing to extend the lockdown by May. And they'll do it realizing that a drop in GDP in the first quarter cannot be avoided. The Bundesbank has already said that the German economy is likely to contract sharply this quarter as the response to the pandemic hit the services sector and even slowed growth in the construction industry. It won't be superfluous to remind that the current prices on the commodity and stock markets have largely taken into account the fact of the rapid recovery of the economy and the exit from lockdowns. And in light of current events, there's a feeling that it is time to admit a mistake and incorporate a new reality into the price.
Long
by Trade24Fx
Week in a Glance: Central Banks, Biden Tax Plans and TurkeyLast week wasn't easy for the financial markets. There were enough reasons for this: the meeting of the Central Banks of the United States, England and Japan. Also, the United States began to master Biden's stimulus package, but they were reminded of the price in the form of future tax initiatives. In addition, the third wave of the pandemic in Europe and the rise in US Treasury yields did not allow stock market buyers to relax and enjoy new all-time highs. We'll briefly go through the most important points of the events mentioned. At the beginning of the week, plenty of news outlets distributed information that President Joe Biden was planning the first major federal tax hike since 1993. Stock markets growth will be hard, expecting a corporate tax hike to 28%. Especially, having an alternative in the form of sharply increased yields of US Treasury bonds (reached a 14-month high) and the expectation of rising inflation. The markets were not calmed even more than the dovish results of the Fed meeting. The US Central Bank left the parameters of monetary policy unchanged and signaled that rates will remain close to zero until at least the beginning of 2023. The Banks of England and Japan didn't change the monetary policy parameters, either. But the Bank of Turkey raised the rate by 2% unexpectedly at once. This was a pretty strong signal in favor of buying Turkish Lira (carry trade, and all). But over the weekend, Erdogan decided that life was too boring and fired the head of the Central Bank. He's long criticized the recent actions of the Central Bank and was very unhappy with the rate hikes. Well, now, it seems, the rate will start to lower. So, the holiday's over, especially considering what will happen to inflation in Turkey after the rate cut in the current conditions. The coming week promises to be generally simpler. But, in particular, it'll be hot in pound pairs: a lot of macroeconomic statistics, starting with inflation data, ending with retail sales and statistics on the labor market. In addition, we're waiting for quite a lot of comments from the officials of the Fed, including the next Powell's testimony in Congress.
by Trade24Fx
1
7.20 Looks like the perfect opportunity to "buy the dip"Erdoğan has dismissed the Central Bank Governor Naci Agbal, to impose his counter views on monetary policy on lower interest rates. Naci Agbal had lifted the policy rate to 19% and in response US currency has retreated to 7,2 level. I have marked the history of changes in Turkish Central Bank Government and some significant policy rates in yellow callout boxes. First thing to be noticed is the frequency of the CB Governor changes, recently Naci Agbal had governed only for 4 months, previous one around 1 year. In CB history the expected average is around 5 years. Second you have to notice how Naci Agbal's appointment dramaticly effected the rise of USD/TRY. He has reversed the uptrend from 8,6 level to the lowest low of 6,9. The new CB Governor is from an islamic economy background and he is strictly against high interest rates, so we should expect the policy to gradualy lower the rates. Regarding the internal political contiditions and several negative economic facts, 7,2 level looks like the perfect dip to buy.
Long
by isiklar_fx
2
Bank of Turkey Surprise, Treasuries Rise and Weak JoblessRegardless of the formally lesser importance, the Bank of Turkey surprise can be considered as the most interesting yesterday's event. Yesterday we wrote that the Central Bank is likely to raise the rate, and the market consensus was an increase of 1% to 18%. In fact, the Bank of Turkey decided to take preventive measures to combat inflation and immediately raised the rate by 200 basis points to 19%. This, of course, was the most powerful reason for buying the Turkish lira. By the end of the day it strengthened by almost 3%. Besides, this is far from the end. So those who didn't buy the lyre yesterday or the day before yesterday should not despair and buy it today. The Bank of England left the monetary policy parameters unchanged as expected by the markets. Also, yesterday, another notable and significant event was the achievement by the yield of 10-year US Treasury bonds to 14-month lows. Growth against such a background will be increasingly difficult for the US stock market, despite the successful dripping of vaccinations and the US economy imminent full opening. Although here (economic recovery) yesterday gave cause for reflection. The data on the number of applications for unemployment benefits unexpectedly came out much worse than forecasted (meaning the initial applications). Instead of the expected 700K, the fact was 770K, which cannot but inspire concern. Especially after those optimistic forecasts that the Fed gave to the markets on Wednesday. Today may well become a day of massive sales in risky asset markets. The fact is that this Friday the mass of options and futures contracts on the US stock market, the so-called "quadruple witching day", expires. On such days, volatility is increased, so in any case, today you should be double careful, or, to be more precise, four times.
Short
by Trade24Fx
3