TURKEY: Analyst Views On Inflation, FX Outlook
Aug-15 12:23
- The CBT struck a more cautious tone on the inflation outlook in yesterday’s Q3 inflation report, keeping its end-2025 CPI forecast unchanged at 24% y/y, but raising its 2026/27 estimates amid food and energy pressures. To recap, the central bank will now target inflation to reach 16% by end-2026 and 9% by end-2027.
- Commerzbank believes that inflation may not cool as quickly as the CBT expects, with the seasonally-adjusted m/m rate of inflation still annualising to nearly 35% every month. They believe that the CBT began to cut rates a bit prematurely, leading to some renewed market scepticism regarding CBT's independence and its prioritisation of price stability. A widening current account deficit and possible under-reporting of inflation jointly constitute risk factors for the lira, in their view.
- In contrast, ING believes that following the latest favourable inflation print there should be enough room for at least one more 300bp cut in September. After that however, they expect a slowdown to a 250bp pace, ending the year at 35%. For FX, although rate cuts should reduce the attractiveness of TRY carry trades, ING believes TRY will remain in a safe zone for now. They expect USDTRY to continue to grind gradually higher, at least through the summer, while still offering a generous FX carry for long TRY positions.
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US: MNI POLITICAL RISK - Trump Downplays More Trade Deals By Aug 1
Jul-16 12:21
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- President Donald Trump will meet the Crown Prince of Bahrain for an investment-focused bilateral meeting, then sign bills at 15:00 ET 20:00 BST.
- Trump said pharmaceutical tariffs could be announced on August 1, starting low and building to a "very high tariff".
- Trump announced a deal with Indonesia, but downplayed the likelihood of more deals before August 1. He said he could strike “two or three” deals before the deadline and would “probably” impose a little over 10% on smaller countries that did not receive tailored rates.
- Canadian PM Mark Carney conceded that a US trade deal is unlikely to lift all tariffs.
- Lack of retaliation from trading partners has allowed the US to collect duties at a rate that implies USD$240 billion additional revenue per year.
- The Senate will vote on Trump's rescission package this evening after overcoming Republican opposition. Speaker Mike Johnson (R-LA) will take a second run at advancing three crypto bills, after conservatives tanked a rule vote yesterday.
- Trump and OMB Director Vought are hinting that mismanagement of a renovation project could justify Fed Chair Powell's dismissal.
- Trump said he did not advise Ukraine to strike targets deep inside Russia.
- The Pentagon has withdrawn senior officials from the Aspen Security Forum, citing ideological differences. The US and 18 allies began military exercises in Australia.
- Poll of the Day: Favourable views of China have increased, but most countries prioritise strong ties with the US.
Full Article: US DAILY BRIEF
SONIA OPTIONS: SFIZ5 95.75/96.00/96.25 Call Fly Sold
Jul-16 12:15
SFIZ5 95.75/96.00/96.25 call fly 5.5K given at 4.5.
BONDS: Lower Oil Prices Still Providing Support
Jul-16 12:13
Continued downside in crude oil provides background support for core global FI markets, although the recovery from session lows can hardly be deemed a meaningful rally at this stage.
- Overnight/early London highs capped the recovery in TY futures, while Bund futures remain below their pre-CPI UK session highs.
- Little to note in terms of meaningful macro cues since the UK data, with focus on the impending U.S. PPI release after yesterday’s CPI data pointed towards tariff feedthrough into some core goods categories. The usual focus on readthrough into the Fed’s preferred PCE inflation measure will be seen In the wake of the release.
- General themes of fiscal worry remain evident, despite the relief rally in the long end of the JGB curve in Tokyo hours and stabilisation away from lows in wider core global FI through the London morning.
- That leaves bond bears in control from a technical perspective, even with major 10-Year benchmark yields comfortably off year-to-date highs.
- Note that 30-Year German yields remain less than 5bp off their ’23 high, located at 3.263%.
