TURKEY: Main Opposition Re-elects Ozel as CHP Chairman
Sep-22 07:11
- Main opposition CHP Chairman Ozgur Ozel was reelected at the party’s 22nd Extraordinary Congress, convened at the request of party delegates in response to the lawsuit filed against the CHP’s 38th Ordinary Congress. Party officials said the manoeuvre was meant to counter the possibility that courts may oust the current leadership and replace it with a government-approved trustee.
- Additional tariffs on some US items that were introduced in 2018 have been removed, Bloomberg report citing a decree by President Recep Tayyip Erdogan published on Turkey’s official gazette. The additional tariffs ranged from 4% to 70% and covered items including motor vehicles, liquors, rice, tobacco, plastic items, paper. It comes ahead of a meeting between Erdogan and US President Donald Trump on September 25.
- Meanwhile, Turkey has imposed extra tariffs on some motor vehicle imports, including a 25% or minimum $6,000 additional tariff on conventional and hybrid motor vehicles. The additional tariffs won’t apply to imports from EU and other countries that have free trade agreements with Turkey.
- Dunya run a piece in which they note that despite the central bank’s rate cuts, the banking sector is acting more cautious in reducing loan rates. Commercial loans, in particular, have not yet seen a significant reduction. The newspaper note that the CBRT is funding the banking sector at an annual rate of 40.5% through open market operations, and in contrast, the average annual rate on commercial loans stood at 55.46% as of September 12, according to weekly data.
- President Erdogan arrived in the US on Sunday to address this week’s 80th session of the UN General Assembly. Erdogan said he would address the assembly on Tuesday, the first day of the high-level talks.
- Data this morning showed Turkey's adjusted consumer confidence fell to 83.9 in September from 84.3 in August. Tourist arrival data for August is due later this morning.
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FED: NatWest Now Sees Cuts In 2025, Starting In September
Aug-22 20:09
As with Deutsche earlier, NatWest has changed its Fed call after the Powell Jackson Hole speech to reflect a 25bp September cut. Previously, the call was for no cuts in 2025. The new baseline outlook includes further 25bp cuts in December and March, bringing rates closer to neutral ("however, the changing composition of the committee becomes far less clear once Powell term expires in May").
- "While the August jobs and CPI reports will be watched carefully, it is clear to us that Powell has already seen enough to decide renewed action to counter downside economic risks is likely warranted, and so we now look for a 25 basis point rate cut on September 17th.
- "We expect officials will very much downplay the likelihood of a 50bp rate cut leading up to the jobs data, but we have to admit if the report is "weak enough" (e.g., the unemployment rate increases by 0.3pct to 4.5% (where officials had it at year end) anything can happen and wouldn't rule anything out. However, given the latest pivot and with financial markets pricing (86% of a 25bp rate cut) a lot has to happen (unemployment rate 3-handle and core CPI +0.5%) for the FOMC to undeliver and hold off from a rate cut in September. "
USDCAD TECHS: Bull Cycle Hindered
Aug-22 20:00
- RES 4: 1.4111 High Apr 10
- RES 3: 1.4019 38.2% retracement of the Feb 3 - Jun 16 bear leg
- RES 2: 1.3968 High May 20
- RES 1: 1.3925 High Aug 22
- PRICE: 1.3840 @ 16:55 BST Aug 22
- SUP 1: 1.3794 20-day EMA
- SUP 2: 1.3769/22 50-day EMA / Low Aug 22
- SUP 3: 1.3576 Low Jul 23
- SUP 4: 1.3557/40 Low Jul 3 / Low Jun 16 and the bear trigger
Gains this week in USDCAD and the breach of resistance at 1.3879, the Aug 1 high, marked a positive development, however the slippage into the Friday close undermines this sentiment - for now. Moving average studies have crossed and are in a bull-mode position, reinforcing current conditions. An extension higher would signal scope for a climb towards 1.4019, a Fibonacci retracement. On the downside, support to watch lies at 1.3769, the 50-day EMA - a level not yet challenged by the correction lower.
CANADA: Q2 Expected To See GDP Contraction, BOC's Estimate Looks Too Negative
Aug-22 19:56
The June retail sales release helps wrap up the last major data before Canadian Q2 GDP is released on Friday August 29.
- Current Bloomberg analyst consensus shows Q2 is expected to show a 0.7% Q/Q annualized contraction, versus +2.2% in Q1. The private sector consensus is more optimistic than the Bank of Canada's -1.5% estimate in its July Monetary Policy Report (which MNI thinks is too low) but the component-by-component breakdown is similar if of differing magnitudes.
- Widely expected are: a softening in household consumption growth (+1.2% in Q1), with a pickup in government spending, continued weakness in fixed investment (-3.0% in Q1) though with residential outperforming business capital formation, and a reversal of Q2's positive contribution from net exports. In short, the data are expected to confirm that trade activity was brought forward to Q1 ahead of tariffs, with the effects reversing in Q2.
- Going forward, the BOC envisages growth resuming in Q3 (+1.0% in its "current tariff" scenario). In the meantime, a weak Q2 reading could provide Governing Council with more conviction to resume easing rates in September, with the July meeting decision noting "If a weakening economy puts further downward pressure on inflation and the upward price pressures from the trade disruptions are contained, there may be a need for a reduction in the policy interest rate".
