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Weekly Market Outlook: April 17th – 21st
Turkey’s constitutional referendum, key data in focus
Next week’s market movers
- In Turkey, citizens will head to the polls to decide whether to grant their government additional powers. The outcome could have a notable impact on the Turkish lira.
- In New Zealand, CPI data for Q1 are expected to show inflation returning to the midpoint of the RBNZ’s target range, which could greatly diminish the likelihood for any further easing.
- From Australia, we get the minutes from the latest RBA meeting, where the Bank remained on hold and shifted to a somewhat more dovish tone.
- We also get key economic data from Eurozone, the UK, China, and Canada.
Major events begin early next week. On Sunday, Turkish citizens will head to the polls to vote on constitutional changes that could greatly expand the executive powers of President Erdogan. The referendum will ask the question of whether to turn Turkey from a parliamentary to a presidential republic. The government and the President argue that a “yes” vote would reduce political deadlocks, thereby accelerating the pace of future reforms. On the other hand, critics of these changes argue that too much power would be concentrated in the hands of one person, which could increase the risk for an authoritarian government in the future. Opinion polls suggest that this race is too close to call. A “yes” outcome is seen by most polls as being more likely, but marginally so. Importantly, the majority of polls show a high percentage of undecided voters, so surprises are definitely possible.
With regards to the Turkish lira, we see the case for the currency to strengthen under a “yes” outcome, and to weaken if the Turkish public votes against these reforms. Ever since the failed military coup last year, Turkey has remained in a state of emergency, which is still ongoing. Media reports suggest that in a “yes” scenario, the government could lift this state of emergency, which in our view could prove positive for the lira in the short-term, as some political uncertainty dissipates. On the other hand, a “no” vote could heighten political uncertainty even further. The state of emergency could stay in place, and there seems to be no clear plan about what happens next.
Some reports suggest that the nation could even go into early elections as soon as this year.
On Monday, markets will remain closed in most G10 nations, in celebration of Easter Monday. Nevertheless, during the Asian morning, we will get China’s GDP data for Q1. Expectations are for the Chinese economy to have grown at the same pace as previously…
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Original Source: FXGiants News