Actually, this isn’t it at all… Things only reached this particular point because of people’s never-ending comments alone. CBRT is now obliged to cut rates. It would be surprise indeed if the Central Bank cuts by lower than 100 bps or higher than 200 bps. Let’s say it happened, even so we should not expect too much vibrancy from FX market.
You tell me whether it would be reasonable to expect USD/TRY rate to boil up just because rates are cut down a little bit. Besides, let me remind you that USD/TRY rate had remained around 5.90 even when the U.S. attempted at imposing sanctions on Turkey. FX rates remained rather calm even when tensions hit peak in Turkey’s international relations; because investors were on alert for selling dollars that they had bought last year for very high prices. And those who want to buy dollars sadly do not have enough liquidity to do so. It should take a disastrous panic to cause a huge movement in FX rates. However, anyone who hopes for that is nothing but mentally ill. Besides, there’s no reason at all to take alarm right now.
The day before yesterday, a Memorandum of Understanding has been signed between Turkey and the Russian Federation, following an agreement with the United States to a ceasefire in Northeastern Syria. I must say Turkey always arises triumphant when it takes and maintain its stance.
The Memorandum of Understanding signed with Russia after a 120-hour period of ceasefire sets forth that both sides will take necessary measures to prevent infiltrations of terrorist elements. As a result, Turkey gained more than it had hoped for on this agreement while both Trump and Putin have been presented with diplomatic gifts. Also, the fact that Russia and Turkey have come to a mutual understanding shut the Iranian government up for a while.
“FX rates seem unlikely to rise under big selling pressure…”
On the other hand, Brexit uncertainty keeps hurting the UK citizens and the UK economy. The parliament blocked PM Johnson’s plan to rush Brexit Deal into force. After losing Commons’ vote on delaying his deal, this time Johnson decided to play his no-deal Brexit card. Apparently, he is trying to buy time to convince Parliament into holding a referendum. I can guess that the EU leaders did not like the idea of Britain’s departure from the European Union while they noticed that fact that UK citizens were exposed to the promotion of misinformation through both social media and other media outlets. It seems now essential for the EU to take a solid political move to change the result, which came into being through the efforts of the U.S. and Russia. A disintegrating Europe would be no good for neither for Europe nor the World.
In the meantime, kicking the day off with 5.80 yesterday, USD/TRY rate fell back to 5.70 towards the evening. As I have always said, in Turkey, political affairs determine the direction of FX rates while its main trend is set by the economy. So, USD/TRY struggles to go below a certain level even if good things happen from time to time. However, USD/TRY struggles when it goes above 5.90 too. Selling pressure still remains on the duo as I mentioned earlier.
In conclusion, I really don’t expect CBRT to make a surprising or shocking decision. There’s no need for anyone to jump for joy or get into a panic.