The Turkish Lira continues to lose heavily and is very close to historic highs, looking at the USDTRY pair. The next decision is only in 2 weeks, but already this week Erdogan indicated again that he expects a further cut in interest rates, from the current level of 14%. Recall that inflation in Turkey broke through the next level and in May is already 73.5% y/y.
Turkey's foreign exchange reserves are only a few billion dollars, but without swaps they would be negative. In view of this, there is a huge risk that capital controls will be introduced to end further depreciation of the currency. Of course, it is worth remembering that such a decision makes no sense in the long term, given the desire to return to the financial markets. Such decisions are only good at a time when a quick return to normality is expected. Turkey suffers greatly from high oil prices, as it imports virtually every barrel it consumes. S&P Global points to the very high risk of introducing capital controls (it is worth remembering what happened to the ruble - the ruble exchange rate is kept artificially at a very strong level, but at the same time there is no possibility of entering into transactions on the ruble). Meanwhile, the forward 1-month rate for USDTRY is 18.3...
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile app
Source: xStation5
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
