TURKEY: CBRT Closely Monitoring Effects of Geopolitics on the Inflation Outlook

• MNI: US NFIB JAN SMALL BUSINESS INDEX 99.3

UBS’ latest CTA positioning update notes that:

• “CTAs are reducing their equity exposure, but at a slow pace, with ~ $10bln done in the last two weeks, plus another $10bln expected over the next two. Their bias towards selling has somewhat eased, although still there, as the negative base effects - from the “post-Liberation Day” rally getting out of the rolling window - have been absorbed”.
• “In rates, the negative momentum is starting to show signs of exhaustion. As a result, we expect CTAs to be quite reactive to any positive price action. Their reaction function is clearly skewed towards buying, and the potential amounts are eye catching. In a scenario where global yields were to go lower by ~20bps, CTAs could buy up to $300/400mln of bonds DV01”.
• “In Credit, CTAs have held a max long position since April 2025. It may be time for caution. With cross-asset volatility picking up, CTAs could start unwinding their spread exposure, starting with low yielders”.
• “In FX, CTAs have increased their USD shorts by 80% since our last update, mostly in favour of G10 FX. We expect flows to stabilize from here, although rising volatilities should trigger a little bit of profit taking. EUR/JPY is worth monitoring in that sense”.
• “Energy has become CTAs' favourite cohort within commodities, tripling their allocation in the last few weeks. They reduced their precious metals exposure by 30%, due to risk management. The next leg of selling will likely be driven by weaker signalling”.

• Swiss Franc outperformance has been notable since mid-January, with the Citi Broad Real Effective Exchange Rate Index rising back to levels last seen in April 2025. Most recently, EURCHF posted a significant close below the 0.92 handle, a technical area that had been in focus since May 2024.
• While price action has been a slow grind, downside momentum has extended, resulting in fresh lows at 0.9120 today, the lowest level since the removal of the peg in 2015. In terms of technical supports, we have bridged the gap to 0.9121, the 0.764 projection of the Mar 14 - Apr 11 - Aug 18 price swing. The 1.00 projection comes in at 0.9017.
• While there has been some speculation that the latest franc strength might be ringing the alarm bells for the SNB, we highlighted yesterday that Morgan Stanley takes a contrasting view and has recommended selling EURCHF with a target at 0.8700.
• Swiss CPI on Friday will be especially interesting on the back of the annual January services repricing in a larger cluster of categories. The next SNB meeting is not scheduled until March 19.