Lira stable after the CBRT decision, EURTRY in a downtrend

• CBRT did not change interest rates – in line with expectations
• The Bank is ready to act, if needed
• EURTRY reacts in a calm way, 6.00 remains the level to watch

The Central Bank of the Republic of Turkey did not change interest rates that remain on elevated levels. Although the main rate is currently below inflation (24% vs 24.5%) it’s high level is expected to depress demand and recovering lira should help contain inflationary pressures going forward. The lira has had a turbulent year so far as economic imbalanced were exposed by diplomatic conflict with the US and led to a sharp sell-off of the currency. However, the Turkish authorities seemed realize that a more market (and US) friendly approach was needed, raised rates significantly and freed the US pastor.

EURTRY is in a strong downward channel. Source: xStation5

EURTRY remains in a steep downward channel and so far each test of the upper limit has been used as a selling opportunity. Because of high rates in Turkey sellers enjoy massive (positive) swap point gains. The level to watch is 6.00 which was the “base” for the “Pastor rally”.

Traders should pay attention to the ECB meeting that may impact the euro significantly. The post-meeting conference begins at 1:30pm BST.