Turkish lira hits record low and rebounces

  • The Turkish lira dropped more than 5 percent on Wednesday and forced the CBT to hike rates by 300 basis points reaching 16.5%.
  • The central bank acted after about three weeks continuous depreciation of the Turkish Lira against the USD.
  • Erdogan, who earlier intended to practically take over the country’s monetary policy, pledged allegiance to global principles of monetary policy in a televised address yesterday.
  • Analysts consider the 300 bp rate hike as the minimum and expect further rate hikes as consumer inflation accelerates.
  • Should there be further headlines about rate hikes from he CBT we could see the Turkish Lira strengthening.

Trump wants a new structure for US-China trade deal

  • President Trump said yesterday that any US-China trade deal would require “a different structure”, refuelling uncertainty.
  • The statement was made as negotiations are already under way, raising fears about reigniting a trade war.
  • The trade talks seem to be clouded by the negotiations for North Korea’s nuclear arsenal, where China is North Korea’s only ally.
  • Should there be more headlines about further uncertainty in the US-Sino trade talks we could see safe havens strengthening.

Today’s other economic highlights

  1. Germany: GDP for Q1, Survey:+0.3% qoq Prior: +0.3% qoq, 06:00 (GMT), could weaken EUR
    • GfK Consumer Confidence for June, Survey:10.8 Prior:10.8, 06:00 (GMT), could weaken EUR
  2. UK: Retail Sales for April, Survey: +0.7% mom, Prior: -1.2% mom, 08:30 (GMT), could support the GBP
    • Core Retail Sales for April, Survey: +0.4% mom, Prior: -0.5% mom, 08:30 (GMT), could support GBP
  3. US: Existing Home Sales for April, Survey: 5.56M Prior: 5.60M, 14:00 (GMT), neutral to bearish for USD
  4. Speakers : As for speakers, BoE Governor Mark Carney (08:00 GMT and 19:10 GMT), New York Fed president William Dudley (08:15 GMT), ECB’s Peter Praet (10:30 GMT), FOMC member Raphael Bostic (14:35 GMT), Dallas Fed President Kaplan (14:35 GMT and 15:00 GMT) and FOMC member Patrick Harker (18:00 GMT) speak. Also please be advised that ECB’s Account of Monetary meeting minutes will be released (11:30 GMT).

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