3 May 2016
USD/TRY seen higher in Q2 – Rabobank
Strategist at Rabobank Piotr Matys sees the pair edging higher in the next weeks.
Key Quotes
“Growing market expectations that the Fed may not raise interest rates this year have allowed the Turkish lira to regain composure after turbulent year dominated by prevailing uncertainty in Turkish politics and concerns about China”.
“That said, we are reluctant to pursue further gains in the lira due to our baseline scenario that the Fed may hike rates in June. Given that such an outcome is not priced in by the market at this stage, we are braced for a potential squeeze in USD/TRY in Q2”.
“The 25bps cut in the overnight lending rate in March signaled that the bias has shifted to monetary policy easing. While this was followed by a 50 bps cut in April, newly appointed Governor Cetinkaya may have less room for manoeuvre if lira’s volatility increases in the coming months”.
Key Quotes
“Growing market expectations that the Fed may not raise interest rates this year have allowed the Turkish lira to regain composure after turbulent year dominated by prevailing uncertainty in Turkish politics and concerns about China”.
“That said, we are reluctant to pursue further gains in the lira due to our baseline scenario that the Fed may hike rates in June. Given that such an outcome is not priced in by the market at this stage, we are braced for a potential squeeze in USD/TRY in Q2”.
“The 25bps cut in the overnight lending rate in March signaled that the bias has shifted to monetary policy easing. While this was followed by a 50 bps cut in April, newly appointed Governor Cetinkaya may have less room for manoeuvre if lira’s volatility increases in the coming months”.