by SignalFactory · November 19, 2021 | 13:24:09 UTC
USD/TRY bulls keep reins around the record high remain sidelined near $11.12 heading into Friday’s European session. The Turkish lira (TRY) pair is up for the third consecutive weekly advance wherein the latest run-up follows a 100 basis points (bps) of a rate cut by the Central Bank of the Republic of Turkey (CBRT), marked the previous day.
The Central Bank of the Republic of Turkey (CBRT) cuts the policy rate by 100 basis points to 15.00%. USD/TRY has jumped to close to 11. Economists at TD Securities think that things will get worse before they get better but as the policy is eventually tightened, USD/TRY can fall and settle in the low 10s/high 9s.
Rate cuts continue, the lira slide too – “The CBRT has cut the repo rate by 100bps to 15%, in line with consensus, but more aggressively than we had expected.”
“We still forecast USDTRY at 9.35 by year-end and 10.90 by end-2022. The short-term forecasts seem beyond what is reachable as moves occurred much faster than we had thought. But our forecast for the pair at 11.00 in Q2 2023, 12.90 by end-Q3 and then higher at 14.50 in 2024 and 17.00 in 2025 do justice to our long-held bearish view on the Turkish lira.”
Key takeaways from policy statement as summarized by Reuters: “Decided to cut rates after evaluating areas that monetary policy can impact.”
“Positive impact of policy on commercial loans being seen.”
“Evaluated temporary impacts on inflation will have influence in the first half of 2022.”
“Might ease policy again in December.”
“Will continue to use all policy tools until 5% inflation target achieved.”
“Stability in the general price level will foster macroeconomic stability and financial stability through the fall in country risk premium.”
“Stability in general price level would create a viable foundation for investment, production, and employment to continue growing in a healthy and sustainable way.”
“Improvement in annualized current account is expected to continue in the rest of the year due to the strong upward trend in exports.”
“For the time being, we think USD/TRY will very soon break above the 11.00 handle and continue pressuring higher. This will give little options to the CBRT but to reverse monetary loosening. We think the Bank has no more than 4 weeks at its disposal.”
“When rate hikes kick in, USD/TRY can finally stabilize and start falling. This could still help TRY to settle in the low 10s or high 9s sometimes over the coming three months, under the premise that rates will have to be brought back up above the 20% mark.”
USD/TRY Long (Buy) Enter At: 11.196178 T.P_1: 11.345598 T.P_2: 11.715246 T.P_3: 12.149128 T.P_4: 12.597136 S.L: 10.617531
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