CBT Interest Rate Decision

The Central Bank of Turkey (CBT) will announce at 11:00 (GMT) it’s interest rate decision today and is expected to hike rates by 100-125 basis points reaching 18%+ from current 17.75%.

15 out of 16 economists in a poll contacted by Reuters, supported the scenario of a rate hike as currently inflation runs at a rate of 15% while the bank’s target is 5% and respective expectations are of 12-13%.

The scenario of a rate hike was also strengthened by a statement of the Turkish finance minister that they would not fight the market.

Analysts see the case for the Lira to strengthen in case of a rate hike, while to weaken should the bank remain on hold, implying a possible meddling of the government with monetary policy.

USD/TRY dropped breaking the 4.7650 (R1) support line (now turned to resistance) reflecting the slight strengthening of the Turkish Lira yesterday.

We could see the pair dropping even further today should the CBT hike rates substantially.

If the bears continue to reign over the market, we could see the pair breaking the 4.6810 (S1) support line and aim for the 4.6000 (S2) support barrier.

Should the bulls take over, we could see the pair breaking the 4.7650 (R1) resistance line and aim if not break the 4.8340 (R2) resistance barrier, trying to approach the 4.9000 (R3) resistance area.

USD remains soft despite yield rising

USD found some support yesterday as the 10 year treasury yields rose, however remained soft.

The rise of the yields stemmed from expectations that the Fed will maintain its 4 rate hike path in 2018 despite criticism by president Trump.

Analysts stated that the US economy is in a very healthy state overall and that currently it is unimaginable that the Fed would stop raising interest rates.

Should there be further headlines strengthening that scenario, we could see the USD getting further support.

USD/JPY rose yesterday breaking the 111.30 (R1) resistance line, correcting somewhat during today’s Asian session.

We see the case for the pair to continue in a sideways movement today, maybe with some bullish tendencies.

The pair could prove to be sensitive to any further rise of the US treasury yields as well as any tweets from president Trump regarding monetary policy.

It also may prove sensitive to any announcements by the Bank of Japan regarding its QQE program.

Should the pair come under selling interest we could see it breaking the 110.75 (S1) support line while should it find extensive buying orders along its path, we could see it breaking the 111.30 (R1) resistance line, aiming for the 112.05 (R2) resistance hurdle.

In today’s other economic highlights:

In the European session we get Germany’s, France’s and Eurozone’s preliminary PMI’s. Should the PMI’s drop as forecasted we could see the single currency weakening.

Late in the American session we get the API weekly crude oil stock figure which could move oil prices.

For further analysis and fundamental news regarding oil, please refer to our oil weekly outlook due out later today.