CBRT seen unchanged, TRY under pressure – TDS

Strategists at TD Securities assessed the upcoming CBRT interest rate decision and the prospects for the Turkish Lira.

Key Quotes

“We expect all key rates to remain unchanged on Thursday, 26 October. The CBRT’s Weighted Average Cost of Funding (WACF) should also remain unchanged at around 12%. The Bank’s rhetoric is also unlikely to change much and will be perceived as hawkish”.

“Current market dynamics are nothing the CBRT can ignore. Lira stability remains at the core of CBRT’s strategy, but TRY is likely to trade weak against USD and EUR for now. Compounded with political uncertainties this makes trading TRYZAR a toss of a coin. Therefore, we are biased to prefer long USDTRY and EURTRY positions going into the Thursday meeting”.

“We now expect CBRT easing to start in Q2 2018 instead of December 2017. We continue to forecast easing to be delivered in steps of 50bps at each of three successive meetings until the start of Q3”.