24 Apr 2014
EMEA EM Express: Turkish central bank stays put in April
During it's monetary policy meeting held on Thursday the Central Bank of the Turkish Republic (CBRT) decided to hold rates steady in April, against expectations and amid growing political pressure to carry out a reduction. The one-week repo rate remained at 10%, the overnight lending rate at 12%, and the overnight borrowing rate at 8%.
The CBRT cut the late liquidity lending rate however, to 13.50% from 15.00%, due to the fact that the “recent decline in uncertainties and partial improvement in the risk premium indicators have reduced the need for an additional tightening in liquidity policy,” as the MPC explained in the official statement., adding however that it was just a technical adjustment with little impact on monetary policy.
Cristian Maggio, Senior Emerging Markets Strategist at TD Securities believes that the central bank's Governor Erdem Basci made the right decision, but that in the face of further political pressure he might give in, “especially as we get closer to the August presidential elections, in proximity of which Erdogan will surely demand more support from the CBRT.”
The analyst adds that “while today’s decision is positive for lira and should be negative for yields, we may still see the CBRT easing rates too early in the coming months.”
Meanwhile in Ukraine the situation remains tense as the Geneva accord continues to be ignored by pro-Russian separatists occupying government buildings in the eastern part of the country. Russian president Vladimir Putin, who ordered more military drills close to the Ukrainian borders, declared once again on Thursday that Moscow had legitimate interests in Crimea.
Putin said that Kiev's use of force in the eastern regions was “a serious crime against their own nation,” influencing “intergovernmental relations” between Russia and Ukraine. He also suggested that the impact of the West's sanctions was affecting economic activity in Russia, but not to a great extent and that eventually it would have a negative effect on the global economy.
US president Barack Obama stressed today during a joint press conference with Japan's PM Shinzo Abe in Tokyo that “additional sanctions may not change Mr. Putin’s calculus,” but that “How well they change his calculus in part depends on not only us applying sanctions, but also the cooperation of other countries.”
Economic data
The Polish Unemployment Rate, released on Thursday, fell to 13.5% in March from 13.9 in February and below forecasts of 13.6%. Polish annual Retail Sales rose by 3.1%, following a 7% increase and considerably below expectations of 5.7% growth.
Cristian Maggio from TD Securities sees the drop in the Polish Unemployment Rate as proof that the recovery in the country is strong. He considers the disappointing Retail Sales numbers as “a transient setback in an upward trend.”
The South African Producer Price Index, released by Statistics South Africa Head Office, increased by 1.3% in March, after rising by 1.3% also in February. On an annual basis the PPI climbed 8.2%, up from 7.7%.
Turkish Capacity Utilization ticked up to 74.4% in April from 73.1% in March. Manufacturing Confidence was also up at 112.70 from 108.60.
On Wednesday the Russian Federation Federal State Statistics Service revealed that Russian Business Confidence improved to -3 from -2 and against consensus of deteriorating further to -6.
Technicals
The Turkish lira's reaction to the central bank's decision to stay on hod today was positively, falling to the 2.1300 area against the dollar from 2.15 overnight.
On Wednesday the USD/TRY daily FXStreet Trend Index was slightly bullish, with the OB/OS Index neutral. RSI was at 50 at the last close, and has slid to 28 so far today. Daily 2-StDev Volatility Bandwidth was shrinking at 236 pips, with ATR (14) shrinking at 190 pips. The 1D 200 SMA was at 2.0811, while the 1D 20 EMA was at 2.1432 .
The CBRT cut the late liquidity lending rate however, to 13.50% from 15.00%, due to the fact that the “recent decline in uncertainties and partial improvement in the risk premium indicators have reduced the need for an additional tightening in liquidity policy,” as the MPC explained in the official statement., adding however that it was just a technical adjustment with little impact on monetary policy.
Cristian Maggio, Senior Emerging Markets Strategist at TD Securities believes that the central bank's Governor Erdem Basci made the right decision, but that in the face of further political pressure he might give in, “especially as we get closer to the August presidential elections, in proximity of which Erdogan will surely demand more support from the CBRT.”
The analyst adds that “while today’s decision is positive for lira and should be negative for yields, we may still see the CBRT easing rates too early in the coming months.”
Meanwhile in Ukraine the situation remains tense as the Geneva accord continues to be ignored by pro-Russian separatists occupying government buildings in the eastern part of the country. Russian president Vladimir Putin, who ordered more military drills close to the Ukrainian borders, declared once again on Thursday that Moscow had legitimate interests in Crimea.
Putin said that Kiev's use of force in the eastern regions was “a serious crime against their own nation,” influencing “intergovernmental relations” between Russia and Ukraine. He also suggested that the impact of the West's sanctions was affecting economic activity in Russia, but not to a great extent and that eventually it would have a negative effect on the global economy.
US president Barack Obama stressed today during a joint press conference with Japan's PM Shinzo Abe in Tokyo that “additional sanctions may not change Mr. Putin’s calculus,” but that “How well they change his calculus in part depends on not only us applying sanctions, but also the cooperation of other countries.”
Economic data
The Polish Unemployment Rate, released on Thursday, fell to 13.5% in March from 13.9 in February and below forecasts of 13.6%. Polish annual Retail Sales rose by 3.1%, following a 7% increase and considerably below expectations of 5.7% growth.
Cristian Maggio from TD Securities sees the drop in the Polish Unemployment Rate as proof that the recovery in the country is strong. He considers the disappointing Retail Sales numbers as “a transient setback in an upward trend.”
The South African Producer Price Index, released by Statistics South Africa Head Office, increased by 1.3% in March, after rising by 1.3% also in February. On an annual basis the PPI climbed 8.2%, up from 7.7%.
Turkish Capacity Utilization ticked up to 74.4% in April from 73.1% in March. Manufacturing Confidence was also up at 112.70 from 108.60.
On Wednesday the Russian Federation Federal State Statistics Service revealed that Russian Business Confidence improved to -3 from -2 and against consensus of deteriorating further to -6.
Technicals
The Turkish lira's reaction to the central bank's decision to stay on hod today was positively, falling to the 2.1300 area against the dollar from 2.15 overnight.
On Wednesday the USD/TRY daily FXStreet Trend Index was slightly bullish, with the OB/OS Index neutral. RSI was at 50 at the last close, and has slid to 28 so far today. Daily 2-StDev Volatility Bandwidth was shrinking at 236 pips, with ATR (14) shrinking at 190 pips. The 1D 200 SMA was at 2.0811, while the 1D 20 EMA was at 2.1432 .