USD/TRY, CBRT Price Analysis & News
- New CBRT Governor Likely to Maintain Interest Rates
- Surprise Cut However, Could See USD/TRY Back at Record High
USDTRY: All eyes will be firmly fixed on Today’s Turkish Central Bank Rate Decision, marking the first meeting for the new governor, Kavcioglu, after his predecessor had been unexpectedly ousted following a larger than expected hike (200bps vs 100bps expected). Ahead of the meeting, President Erdogan has had his say, stating that he hopes interest rates to be cut to single digits. However, with the Turkish Lira down over 11% since March 22nd and with inflation rising to 16.2%, cutting rates will have to wait for now. This is in line with expectations for the policy rate to remain at 19%, while one forecaster sees a 50bps cut at today’s meeting. That said, the new governor has recently stated that markets should not take for granted that he will cut interest rates as soon as April, pledging that the policy rate will be above inflation. In turn, should policy be left unchanged, the initial focus will be on the accompanying statement as to whether the central bank signals that they could embark on an easing cycle in the coming months. Given President Erdogan’s comments that he wishes for single digit interest rates, you would think that a reversal in tightening is likely in the near term. Should, however, the central bank surprise with a rate cut, a move 10 handle is not an unreasonable target in the short run.
The USDTRY 1-day volatility gauge has picked up as the tenor captures the CBRT decision and thus market participants can expect a volatile reaction with the expected range at 7.94-8.20. As mentioned previously, hints that a cutting cycle is on the way is likely to keep TRY risks tilted to the downside with a move to 8.456 to be expected and the record high above. That said, should the central bank maintain its tighter stance this opens the door to a dip below 8.00, however, risks remain tilted to USDTRY upside.
USD/TRY Chart: Daily Time Frame