USD/TRY: On track to test January highs – BBH

By FXStreet According to analysts from Brown Brother Harriman, the Turkish Lira will continue to underperform amid rising political concerns that outweigh improving fundamentals.

Key Quotes:

“The economy remains sluggish (…) Government forecasts for 4.5% growth this year and 5% next year appear too optimistic.”

“Price pressures are easing, with CPI rising 6.6% y/y in April. This is back in the 3-7% target range and the lowest rate since May 2013, and suggests that the easing cycle will intensify (…) It looks increasingly likely that the benchmark rate will be cut soon, which has been kept steady at 7.5% since February 2015. A cut at the next meeting May 24 seems likely.”

“With a new, untested central bank governor in place, we think markets will remain rightfully nervous about policymaking and institutional independence.”

“USD/TRY is on track to test (and likely surpass) the January high near 3.06. That high fell just short of the all-time high near 3.0750 from September 2015. Support is seen near 2.90 and then 2.80.”

“Our EM Equity model has Turkey at an “Underweight” position, down from “Neutral” the previous quarter.”

“With inflation likely to remain low and the central bank about to intensify its easing cycle, we think Turkish …read more

Source:: FX Street