TURKEY: MNI CBRT Review – July 2025

• Yesterday's FX options volumes cleared $120bln - the busiest day for derivatives since June 12th and the second busiest since early May. Activity was led by a busier EUR/USD market, however EM FX was also in focus with much higher-than-usual activity across BRL, KRW and MXN.
• Given the post-ceasefire rally in EUR/USD spot, no surprise to see EUR calls dominating ($3 in EUR calls have traded for every $2 in puts so far this week). We note sizeable interest in $1.1700 calls, which see cumulative notional of over $4bln so far this week - a level spot hasn't traded above since 2021. Vol hedges have been a dominant theme so far Wednesday, with sizeable 1.1670 straddles (expiring late September) and 1.1430/1.1790 strangles (expiring early July) among the highlights.
• Where does this leave vol? The front end of the G10 FX vol curve remains under pressure. Implied vols across JPY, EUR, GBP, CHF and others are in the lower-end of the recent range, and through the bottom of the lower quartile in some instances. As a result, NZD and AUD are the G10 currencies maintaining a positive realised/implied vol ratio - and only just. This may signal a base in implied, which are holding despite the slide in realised volatility - as the expiry of the pause in Trump's Liberation Day tariffs on July 8th looms as the next potential driver of uncertainty.

Speaking at the NATO summit, US President Donald Trump says, "We're with them all the way" when asked by reporters about the US' commitment to Article 5 (the collective defence clause. Adds that "NATO will be very strong". NATO Secretary General Mark Rutte praises Trump on getting NATO countries to increase defence spending, says that "Today we will decide to go to 5% [of GDP]," adding "This is about Europeans and Canadians paying more, not American taxpayers." 

• Trump says that the Iran-Israel ceasefire is "going well". Asked on Iran's uranium enrichment plans, Trump says, "We will not allow that militarily...Iran is not going to have a bomb...the last thing Iran wants to do is enrich anything." Says the US will have "somewhat of a relationship" with Iran.
• Asked on the NYT report claiming that, according to intel reports, the US strikes on enrichment facilities only caused superficial damage, Trump says, "They really don't know". Adds "I believe it was total obliteration." Claims the Iranian nuclear programme has been put back "decades" and that the US strike "ended the war".
• Asked if the US would strike Iran again if it rebuilds nuclear sites, Trump responds: "Sure".
• US Secretary of Defence Pete Hegseth says that "The bombs landed right where they were supposed to, it was devastation". Says there will be an investigation into the leak of the report. Secretary of State Marco Rubio says the Iranian conversion facility "can't even be found on the map, it is wiped out."

• Today and tomorrow the Bank of England will host its CCBS Conference with the title of "Transforming monetary policy – How should we think about uncertainty and risks?" The main gist of the conference will be following on from the Bernanke review and will provide external perspectives to the BOE on how other central banks produce their forecasting materials and communications.
• More importantly, it will likely provide updates on how the BOE has progressed with the process of making changes to its forecasting processes and models and in that sense it won't just be the MPC members speaking that we will be paying attention to through the conference.
• Opening remarks are due from Deputy Governor Lombardelli and CCBS Director John Power at 9:45BST.
• Chief Economist Pill chairs the keynote at 10:00BST on conditioning assumptions and monpol comms with MIT Professor Athanasios Orphanides.
• There is then a talk on forecast accuracy and efficiency at the BOE at 10:45BST and on CB modelling an forecasting using AI (from a Bank of Spain Economist).
• After lunch at 13:30BST there is another keynote on Riksbank communications with First Deputy Governor Breman and chaired by BOE Deputy Governor Lombardelli and then a talk on modelling and forecast from a Norges Bank Senior Advisor.
• From 15:30 onwards there is a panel on best practice in forecasting for monpol purposes before a talk from the BOE's Lead Economic Analyst for Monetary Analysis Sumer Singh on DSGE modelling.
• The agenda for tomorrow and the rest of the conference is here.