The rally in USD/TRY since last week elevates the importance of Thursday’s central bank meeting. Economists at Credit Suisse will wait for the rate decision outcome before formalising a new short-term target, which is most likely going to be above the current 9.60 target, even if the central bank remains on hold.
“We will wait for Thursday’s rate decision outcome before formalising a new short-term target which is most likely going to be higher than the 9.60 target which we set on 20 October, even if the central bank remains on hold.”
“We highlight a few mitigating factors which could limit USD/TRY upside if the central bank does not surprise markets on the dovish side again tomorrow – these are historical sell-off retracements patterns in USD/TRY, possible FX interventions and light international positioning.”
“In the end, the central bank may feel forced to reverse its recent policy rate cuts by raising the policy rate; but we suspect that more USD/TRY upside is needed before that happens.”
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