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  • richard evans

Not looking good for Turkey ahead of Thanksgiving

Good morning

Historically this is not a great time of year for the Turkey, what with Thanksgiving and Christmas. But what about the currency? I have mentioned TRY a few times recently given some sizeable currency and interest rate moves. Less than one week ago, CBRT cut rates and TRY weakened with USDTRY around 11.00 and EURTRY 12.40. Since then TRY has remained under pressure but yesterday saw some massive moves, USDTRY up to 13.10 and EURTRY as high as 14.70. CBRT said they would intervene if volatility was excessive, I think a move of 15% or so in one day should be regarded as excessive but so far I have not seen any confirmation CBRT have been involved.

ECBs de Guindos has suggested that inflation in Europe may be becoming more structural rather than transitory. Other central banks have suggested the same but I do not recall ECB officials taking this stance. EUR not really affected but it will be interesting to see if other ECB members follow this line of thinking in the coming weeks. Weidmann and Schnabel speak later today, both of whom mentioned upside inflation risks. EURUSD now 1.1230, GBPUSD 1.3370, EURGBP 0.8400 (GBPEUR 1.1905).

RBNZ raised interest rates 25bps to 0.75% as widely expected. They had considered a 50bps rise but decided on the more cautious, smaller step. Another 25bps rise is currently priced in for its Fed meeting. NZD is a little lower since the announcement, NZDUSD now at 0.6915 and AUDNZD at 1.0440. NZ has said its borders will reopen to fully vaccinated visitors from early in the New Year, which is great news for travellers but as we have seen, any reopening is followed by a wave of Covid infections. NZ had been doing reasonably well in controlling Covid by shutting its borders but there does come a time where you need to reconnect with the world. Expect infections to increase after the reopening.

Meanwhile EU’s Covid situation continues to make the headlines, WHO have suggested EU could lose a further 700,000 lives to the virus by March if current trends continue. It warns that hospitals are likely to come under more stress, particularly in ICU, unless action is taken to reduce transmission. We have heard of Covid tablets that aim to reduce hospitalisations, I guess it is too early to know if these have any impact even though tests suggest they can cut the risk of severe illness or death by between 50 and 85%.

Oil prices have shifted higher despite the release of strategic reserves, perhaps that threat of limited supply from OPEC that I mentioned yesterday outweighs any short term benefit the reserve release offers. The release was also at the lower end of expectations. WTI pushed 5% higher to $79.00, Brent seeing a similar move pushing it up to $82.50. OPEC meet on 2nd December, we wait to see whether they cut supply, or perhaps more likely fail to instigate the supply increases they had planned.

US Thanksgiving tomorrow so a slew of US data this afternoon ahead of the long weekend. It isn’t a holiday here but markets do tend to dry up a little, a lot of schools are shut over the next couple of days as well. Don’t plan too much mind you, the weather is noticeably colder but I’m also seeing a bit of sleet or snow forecast into the weekend.

- 09.00 German IFO

- 10.10 ECBs Lanetta speaks

- 13.30 US GDP, durable goods, initial jobless claims

- 15.00 Core PCE, new home sales

- 16.00 ECBs Weidmann, Schnabel speak

- 19.00 FOMC minutes

- 21.45 NZ trade balance

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