Turkey and Argentina continues to remain in focus – Danske Bank

Turkish data showed yesterday that inflation accelerated to 17.9% y/y in August - the highest level for 15 years and far from the target of 5%, notes the research team at Danske Bank.

Key Quotes

“This led the Turkish central bank (TCMB) to announce that it will 'adjust' its policy at its meeting next week, and we now expect a rate hike. TRY remains vulnerable in our view though, as markets sense that any action will be 'too little, too late' to stem the lira. Indeed, we doubt that president Erdogan will be willing to accept a rate hike of the 600-700bp at least that we deem is required to turn sentiment around, as he likely fears its adverse consequences for growth.”

“Later in the day, Argentina's president Macri presented a large package of austerity measures in a renewed attempt to stem the currency crisis. Macri acknowledged that foreign investors were signalling his country has been 'living beyond its means', but a seeming lack of coordination with the IMF - which is already heavily involved in Argentina - served to limit the immediate effect on markets from the new measures. That said, the announced tax on exporters could bring some relief to the ARS down the road in our view.”