Coinbase Set To Acquire Turkish Crypto Exchange for $3.2B in May

Key Insights:

  • Reports indicate Coinbase will be acquiring BTC Turk for $3.2 billion.
  • Coinbase’s expansion is noting no hiccups with the recent launch of its NFT marketplace.
  • The acquisition comes at a time when the market is stuck in an uncertain zone.

The world’s second-biggest cryptocurrency exchange, Coinbase, is set to take ownership of the nine-year-old Turkish cryptocurrency exchange, BTC Turk, by May.

Coinbase has been eyeing the opportunity for a while now, and after negotiations, the deal has been finalized at $3.2 billion, down from $5 billion.

Merhaba Coinbase!

The exchange, which boasts of over 4.5 million users, was the first cryptocurrency exchange in Turkey when it launched in 2013 and currently works with seven major banks in the country, allowing for the transfer of money through them.

Last year, the exchange conducted transactions worth 1.7 Trillion Turkish Lira, which translates to approximately $116 billion. Acquiring BTC Turk would open doors for Coinbase to expand into the country, which has a significant presence of crypto there.

As reported by FXEmpire, the country last year was the sixth-largest country when it came to profitability, with investors gaining over $4.5 billion in profits in cryptocurrencies.

But acquisitions aren’t the only way Coinbase is targeting growth, as just recently, the company launched its own NFT marketplace’s beta version and is gearing up for an official launch in the near future. This shows the yearning Coinbase has to become the biggest cryptocurrency exchange on the planet.

The Crypto Market Today

While the deal will be completed in May, penning it now makes sense since the market seems to be recovering slightly. But on a broader scale, it is utterly uncertain as to which direction it could take.

The market has been struggling with around $2 trillion since the first week of January, with the level flipping the trend right as it is about to be breached.

One attempt at the beginning of this month failed again, and now, as the crypto market nears $2 trillion once again, the odds are looking in its favor.

The total crypto market valuation is nearing $2 Trillion once again | Source: TradingView

The last time $2 trillion was breached, the market was already pretty much overbought and ended up overheating.

Since the cooldown, though, the rally seems to be more sustainable since, at the moment, the market is building up to be bullish once again without being overbought.

Thus, the acquisition could prove to be profitable if it finishes around the time when the market is bullish as well.

Turkey: Deterioration of Credit Profile, Unsustainable Governance Raise Likelihood of Deeper Crisis

The outcome of elections due in 2023 will be decisive for Turkey’s credit outlook.

Scope Ratings expects growth in Turkey of only 2.3% in 2022 before 2.4% in 2023, amid risk of sudden economic reversal, after 11% in 2021. Inflation, meanwhile, has risen to highs of 61.1% in March, and is seen staying elevated.

Structurally loose monetary policy, high inflation, negative net foreign-currency reserves as well as elevated and rising sovereign FX exposure increase the risks facing the long-run capacity of the government to repay debt especially during sudden future depreciations of the lira.

The risk of more severe crisis is high in view of testy market conditions and the economy’s external vulnerabilities

The risk of more severe crisis is high in an emerging-market economy with external vulnerabilities like Turkey’s given the spill-over effects on financial markets from Russia’s war in Ukraine. In addition, normalisation of monetary policy by G4 central banks amplifies capital outflow from developing countries.

Turkey’s capacity to repay sovereign debt is, furthermore, intertwined with the likelihood of domestic instability during a forthcoming phase surrounding presidential and legislative elections scheduled mid-2023.

The deterioration of the country’s credit profile underscored our decision of 11 March to downgrade Turkey’s long-term foreign-currency ratings to B- and maintain a Negative Outlook.

The resilience of the domestic banking system is critical to assessing how deep crisis might run

The resilience of the domestic banking system is critical to assessing how deep the economic crisis might run. The sovereign-banking nexus has tightened – with the government dependent at this stage on domestic banks for funding in domestic and in foreign currency.

The banks have been one of the country’s core credit strengths and so long as the banks stand, the sovereign stands. Nevertheless, economic mismanagement and associated credit risks will likely weaken Turkish bank balance sheets, and thus raise the possibility of greater vulnerabilities over the medium run.

A core vulnerability is the value of lira

A core vulnerability is the value of the lira. Periods of significant depreciation impair bank capital adequacy, forcing the government’s recent recapitalisation of several state-owned banks, not to mention raising inflation and compromising sovereign debt sustainability due to FX denomination of the state debt. The government has sought to stabilise the value of lira with policies that artificially ease sell-off pressure. They include protecting lira deposits against FX loss and requiring exchange of 25% of exporter FX revenue to lira.

Unfortunately, such policies are unlikely over the long run to prove sustainable or prevent another severe currency crisis. Instead, the lira savings scheme sacrifices a crucial credit strength of Turkey, namely, the health of the sovereign balance sheet. After TRY 10bn of payments in one week of maturing accounts – equivalent to 0.1% of GDP – the programme was recently expanded to include foreign companies and individuals, with payments expected to increase with time.

We assume general government deficits will average 5.9% of GDP during 2022-26 – more elevated than before the Covid-19 crisis – with government debt increasing to 65.0% of GDP by 2026 from 27.4% at its 2015 low, driven by currency depreciation of an assumed 24% a year over 2022-26, creating debt-servicing stress for a 67% share of central-government debt in foreign currency.

Central bank reserves adjusted for swaps represents a net liability of USD 58.7bn in February. The economy’s current account weakening this year to a deficit of around 8% of GDP – due to elevated global energy and commodity prices, and reliance on wheat import from Russia and Ukraine – represents a further challenge with respect to reserves.

Scheduled 2023 elections could prove to be a make-or-break moment

The current economic trajectory is unsustainable. Scheduled 2023 elections could prove one make-or-break moment. Should President Recep Tayyip Erdoğan hold to power after 2023, economic mismanagement is likely to endure. Alternatively, were opinion polls to prove right, and Erdoğan be defeated, a resetting of the policy framework of Turkey might ensue – fundamentally altering the country’s credit outlook.

For a look at all of today’s economic events, check out our economic calendar.

Dennis Shen is a Director in Sovereign and Public Sector ratings at Scope Ratings GmbH.

 

Shiba Inu Price Predictions: SHIB Trade Volume Increases as Outlook Improves

For starters, the dog-themed digital token was launched in August 2020 by an anonymous developer named Ryoshi. Its case is akin to that of Bitcoin and Satoshi Nakamoto.

One of its core goals was to rival dogecoin. In fact, it is dubbed “doge killer”. But unlike dogecoin, it is developed on the Ethereum network. This means it is compatible with Ethereum, and its ecosystem supports decentralized exchanges and NFTs. In fact, it has a DEX known as Shibaswap. The supply of SHIB is abundant, with a total supply of one quadrillion tokens.

Historic Data and Increasing Trade Volume

One of the factors that caused the massive growth was the loyal support base. Shiba Inu is 100 percent controlled by its community. Elon Musk endorsed the coin, boosting its demand after announcing his intention to own a Shiba puppy. The price skyrocketed 300% after the tweet.

However, the price of Shiba Inu has declined significantly from an all-time high of $0.00008 to $0.00002209, ranking 15th largest cryptocurrency. The good news is that SHIB is positive, setting it for a rebound.

The daily trading volume has increased to $800 million after falling to around $480 million. However, the weekly trading volume is still low. According to data from Yahoo finance, it has only been lower than this week’s trading volume three times since the beginning of the year.

But the number of holders has increased from around 1.1 million at the beginning of the year to around 1.19 million.

Shiba Inu Predictions

CryptoPredictions.com predicts for Shiba Inu to reach $0.00003705 in March. In the second quarter, the price is expected to range between $0.00002537 and $0.00003770.

The monthly average price of Shiba Inu is forecasted to cross $0.00003 in May. An uptrend will see the price of Shiba reach a maximum price of $0.000038 in the third quarter.

However, the momentum is expected to dwindle. During the period the price is predicted to reach a maximum of $0.00003791. The meme coin value is predicted to fall if bears take control of the market. However, it will find support at $0.00002578 in the last quarter.

Why Shiba Inu is Set for Growth

AMC Accepts Shiba Inu Payments

AMC will accept SHIB payments. AMC is the largest movie exhibition in the globe, with 950 theaters. It currently accepts Bitcoin, Litecoin, Bitcoin Cash, and Ether. Customers will pay online on the AMC website by March 16th and the apps by April 16th.

Increasing Shiba Inu Adoption in Turkey

Yet another development that could push the price of Shiba Inu upwards is the increased adoption of the meme coin in Turkey. The country’s economic minister met with the Shiba community to discuss Shiba Inu.

The meeting comes as the Turkish lira is on a free-fall after one of the highest inflation to hits the country. The currency lost 44% in 2021.

New Utilities

The future of cryptocurrencies seems pegged on their utilities. Digital tokens with excellent use cases appeal most to investors and hence enjoy more growth. In October 2021, Shiba Inu released 10000 non-fungible tokens called Shiboshis, which sold out in 35 minutes.

Shiboshi will largely be used to play the Shiba Inu game. However, it also gives users exclusive access to the Shiba Inu Metaverse known as Shiberse.

Without a doubt, the handful number of the Shiba Inu NFTs is not enough for almost 1.2 million Shiba Inu army to enjoy the metaverse and gaming features. Therefore, it is likely that the ecosystem will add more Shiboshi in the future.

Shiba Inu has a native decentralized exchange known as Shibaswap. Just like centralized exchanges, its functions include liquidity pools and swapping. However, the decentralized DEX does not require intermediaries. In addition, it supports governance, staking, and Siboshis NFTs.

Technical Analysis

SHIB seems to be consolidating around a descending triangle which is a buy signal. We can therefore expect the price to reverse and head upwards.

The technical analysis coincides with the increasing holders and trading volume. It is likely that once the bulls take control of the market, they will push the price upwards with strong momentum. The development of the NFT and metaverse endorsement from celebrities could be the trigger to this massive growth.

Conclusion on Shina Inu Predictions

Shiba Inu is one of the strongest growing cryptocurrencies. In 2021, the cryptocurrency had over 1 million Shiba Inu hodlers. It also benefited from an endorsement from Elon musk. However, the price has dropped. But there is positivity in the recent price decline. It provides an opportunity to buy low. With the increasing volume, Shiba could simulate 2021 growth.

A Brief Recap of 2021 Markets

With that in mind, we thought we’d kick off 2022 with a quick recap of some of the highlight moments from 2021. So, if you’re brave enough to relive it all over again, read on!

Vaccination Optimism Vs Delta Fears

The first quarter of 2021 was an interesting time for markets, as traders found themselves caught between fears over the new Delta variant taking hold around the world and optimism over growing vaccination uptake. With most of the world still in lockdown over Q1, the mood on the ground might have been quite bleak. However, markets were already looking ahead, focusing on the anticipated recovery over the year to come.

As vaccination uptake started to increase, particularly in the UK and US, optimism continued to grow. This optimism was further bolstered as reopening began to take shape. However, it was not entirely smooth sailing and markets were prone to downside shocks from any negative headlines such as those around vaccination supply issues, slow take up in places or news of fresh outbreaks and renewed restrictions.

Reddit Vs Wall Street

One of the most enthralling episodes of market action in 2021 was of course the dramatic scenes which took place in several unassuming US stocks. As hundreds, if not thousands, of retail traders joined forces, via communications on popular Reddit thread ‘WallStreetBets’, several stocks saw dramatic gains in very little time. One of these was US stock GameStop which exploded by around 800% as a result of the combined buying.

The driver behind the move was to punish hedge funds which were holding short positions in the stock, driving the company towards bankruptcy. One hedge fund in particular, Melvin Capital, was forced to liquidate its position as a result of the move. Several brokers were also forced to cease trading as a result of the volumes going through, as media coverage drove greater traffic to the site and funnelled more action into the markets.

Similar scenes were encountered in stocks such as Nokia and Blackberry and, there was even an attempt at driving the price of silver higher. While the moves eventually subsided, leading to decline which were as drastic as the rallies, for a brief period the world of financial trading was turned on its head as the little guys took over and stuck it to the man!

Crypto Goes Cray-Cray

The action seen in some of those stocks over the height of the WSB episode was very similar to what we were seeing elsewhere in another section of the market. Crypto traders had an astonishing start to 2021. The market ballooned in size with leading cryptocurrencies seeing extraordinary gains. Crypto icon Bitcoin rocketed higher, by over 120% in the first five months of the year.

However, it was in some of the newer and lesser-known cryptocurrencies where we saw the real fireworks. Some of these “alt-coins” were seen making gains of more than 1000% over the same period as the media attention to cryptocurrency drove a record surge in demand.

Social media played a huge part in the crypto revolution seen over the first half of 2021. Forums, chat-networks and even gaming streaming platforms helped spread the crypto craze as more and more people ploughed into the market. While the rally fizzled out into the summer, for Bitcoin at least, we saw another big rally with price eventually breaking out to fresh highs before collapsing again. Given the volatility in price action, the asset class has become one of the most exciting to watch heading into 2022 which traders keenly debating, where to next?

Commodities Bounce Back

Following a very rough-and-tumble year of trading over 2020, during the height of the pandemic, commodities prices came back with a vengeance in 2021. Fuelled by soaring optimism over vaccination rates and re-openings taking place around the world, demand for raw materials hit fresh highs. Copper, iron ore, steel… You name it, they were buying it!

Aluminum saw its best year in over a decade while agricultural markets also saw huge gains, including corn and sugar which both were higher by more than 20%. The return of world trade in the aftermath of the worst days of the pandemic proved to be a gold mine for commodities traders (get it?)

Oil & Gas Go Off

Drilling down into the commodities rally a little bit more (no more puns I promise), oil and gas saw bumper years. Natural gas was higher by almost 200% at its peak in 2021. A combination of a surge in demand, production issues and dwindling stocks meant that natural gas was hot property in 2021 (ok I lied about the puns).

Oil prices saw a solid year of buying also. The pickup in the global economy as a result of re-openings, the return of world trade and the slow but steady pick up in global travel meant that oil was firmly back in demand over the year, soaring by around 80%.

Energy prices remained a key theme throughout 2021 and after the summer, the supply chain issues which gripped the world saw prices rising even higher. A mixture of COVID related disruptions, political stand-offs and regulatory issues meant that global supply chains broke down. Several energy suppliers went bankrupt, leading to even higher energy prices as supply issues worsened. This all culminated in comedic scenes in the UK as petrol stations began running dry leading to a great deal of drama on the forecourts, endless queuing, and breakdowns galore.

Inflation (The Evil Empire Returns)

One of the standout themes of the year was the return of inflation. Following the crushing blow dealt to global price pressures over 2020, 2021 was the year that prices bounced back. Looking back over some of the prior points we’ve covered, you might already have a good idea why.

Soaring commodities and energy prices, supply chains issues, worker shortages and pent-up demand all combined to create an inflationary storm. In the US, UK and Eurozone, inflation rocketed higher over the summer and into Q3 creating a headache for consumers and central banks alike. CPI hit its highest levels in almost a decade in the UK while in the US prices were at their highest levels since the 1980s.

Turkish Lira Loses the Plot

Earlier we were taking about the dramatic gains seen in some sections of the market. However, as we know, where there are winners there are also losers. The Turkish Lira saw a stunning descent over 2021 with the currency plummeting by almost 200% against the Dollar. Turkey has been caught in an inflationary spiral over recent years which has fuelled sharp devaluations in the currency.

While the CBRT had been slowly correcting the issue through a series of rate hikes, the bank’s methods were not support by President Erdogan. In late 2020, Erdogan ousted the head of the CBRT and replaced him with a banker of his choosing. Since then, the CBRT (against global advice) has returned to rate cuts, causing the Lira to sink further lower and inflation to spiral out of control once again.

Central Banks Back in Focus

Q3 and Q4 saw the markets dealing with an issue we haven’t had to face in a while, central bank tightening! With inflation soaring, and economic indicators confirming solid upward trajectory into Q3, market focus swung back onto the expectation that central banks, especially those in the G10 would soon be tightening. The BOC was the first to pull the trigger in October.

However, despite mounting expectations, it was not a simple story. Many central banks came close before eventually backing off (BOE we’re looking at you) and the market became increasingly frustrated trying to gauge when tightening would begin. The Fed and the BOE eventually joined the party while others, such as the RBA and ECB were forced to sit on the side-lines.

Into the final quarter of the year, it became clear that we are now firmly back into a tightening cycle with the BOE lifting rates and the Fed stepping up the pace of its tapering. The big focus now is on when we are going to see further tightening.

Omicron Vs the World

Of course, we couldn’t wrap up a 2021 recap without a brief word from our sponsor – Omicron. The early days of 2021 struck fear into the hearts of traders (and citizens alike) as news of a new COVID variant hit the wires. First discovered in South Africa, the variant which was shown to be far more infectious than previous trains, was all over the world. Consequently, markets began tanking as countries announced travel restrictions and many feared that we were headed back into global lockdown.

However, scientists soon established that the strain, while more infectious, is not as virulent as prior strains. With this in mind, most countries have so far avoided the strictest of measures and, with data supporting the view that the strain is not as powerful, the outlook remains favourable as we kick off 2022. Some scientists are even hopeful that this strain will prove to be the end of the pandemic given its milder symptoms.

So, now we’ve taken that little walk down memory lane, you’re likely wondering what’s in store for 2022… Well, wonder no more as we’re going to be having a LIVE panel with some of the brightest minds at Tickmill. Our experts will be discussing the developing pandemic, the 3rd year of the presidential cycle, global central bank policies, commodities, crypto and so much more.

Join us on January 19th, 2022, at 18:30 UK time; to hear what our experts think the future could hold! Find out more and save your seat by clicking here.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee, or other group or individual or company.

Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66% of retail investor accounts lose money when trading CFDs with Tickmill Europe Ltd. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money

Will Inflation Hit the Markets?

With US inflation at a 40-year high, in this week’s market update XTB’s market analyst Przemysław Kwiecień examines what this could mean for stocks, commodities and forex, the impact this will have on investors, and how the Fed might react. Expect to find answers to questions such as:

  • What does elevated inflation mean for stocks and commodities?
  • Are investors unprepared for monetary tightening?
  • What is the key data and levels for the pound this week?

Don’s miss our latest market update: Watch now!

For a look at all of today’s economic events, check out our economic calendar.

GOLD Analysis – Bearish Indicators in Place

Gold remained silent even after the FED’s multiple announcements on rate hikes. Gold price will be on the watch this week during the testimony of FED Chair Jerome Powell.

XAUUSD closed the first week of 2022 with a 1.76% loss compared to its closing price of December 2021 at $1830. Inflation hedge – Gold seems to have a weaker edge over the strengthening US Dollar. Investment volumes of Gold decreased in Q3 2021, whilst in Q3 2020 total Gold bound to Investment was 495t a year after that number decreased to 235t. Gold tied to the investment had a dominating demand in Q3 2020 and has been decreasing since then.

Despite an increased purchases of Gold by global Central Banks in 2021, many CBs parted with their precious metal purchases to withhold the deflation of their local currencies as the US Dollar was gaining momentum by the end of 2021. Thus, Turkey had to sell 35.1 tonnes in 2021 to hold Lira from being depreciated, in 2020 Turkish CB purchased 163.1 tonnes of Gold. Largest Gold purchases in 2021 according to the data from the World Gold Council were made by Brazil 62.3 tonnes, Hungary 63 tonnes, India 73.8 tonnes, Japan 80.8 tonnes, Thailand 90.2 tonnes.

Largest CB increase/decrease in Q3 2021 looks as follows.

Based on this data, it is obvious that these Central Banks are hedging against the hike of the US Dollar Index. Kazakhstan, Uzbekistan and Russia will be more vulnerable during recent days against the US Dollar due to developments in Kazakhstan and these states will probably use their Gold purchases to withhold their currencies from depreciation, following the Turkish CB.

Left to right first row – USD/INR, USD/KZT, USD/UZS

Left to right second row – USD/BRL, USD/RUB, USD/TRY

While rate hike news in late 2020 and mid 2021 were referred to as a bullish signal for gold and bearish for the US Dollar Index, since mid 2021 markets more rely on FED’s redemption of goals, promises and forecasts. Despite some forecasts being flickering, achieving one of the main goals is considered bullish for the US Dollar. Positive economic data during this weeks release and Mr. Powell’s positive outlook on the economic recovery of the United States will ignite the bullish momentum of the DXY.

Daily XAUUSD chart projects a triangle pattern, and signals the retest of the lower edge of the triangle, based on the pattern’s rule.

MACD and RSI also signal a bearish trend continuation of XAUUSD up until the end of this winter.

Moving averages on a daily XAUUSD chart also do not favor the Gold bulls. MA200 and MA50 both are above the closing price of XAUUSD. Remarkably, the 200-day moving average is above the 50-day MA. This formation in technical analysis is referred to as a “Death Cross’ and always is a bearish signal.

There still is a dynamic support which was able to withhold Gold from sliding below $1700, however the lack of impulse and a pressure from the USD could force XAUUSD to break this support and go down to $1724 and $1680 below that.

Binance Adds Turkish Lira and Australian Dollar to new Trading Pairs

Popular cryptocurrency exchange, Binance, has added seven new trading pairs to its already exhaustive list. The new pairs are ALICE/BNB, ETH/UST, LRC/BNB, GALA/AUD, OOKI/BNB, ONE/ETH, and ATOM/TRY. Two of these new trading pairs contain fiat currencies.

Binance Adds 7 new Trading Pairs

With over 500 crypto trading pairs on its platform, Binance is one of the few exchanges with an extensive list of trading pairs. These new additions will only give more options to users of the platform. 

While some of the tokens in the new trading pairs are well known, others are fairly new. GALA, the Gala games ecosystem token, was one of the best performing cryptocurrencies of last year with over 26,000% rise in value. So, it’s not surprising that Binance is adding more fiat pairs for it.

On the other hand, OOKI, the native and governance of Ooki protocol, is a new coin. Having just been listed on Binance in December, new trading pairs seem like the next step. Ooki protocol is a decentralized protocol for DeFi and Dapps.

Another new token is Alice which was released in May 2021 for the multiplayer builder game, My Neighbor Alice. Players can buy and develop lands in the game while interacting with neighbors and performing activities. 

Launched in the height of the market, the price rose to an ATH of $42.55, but it’s currently trading below $12.

Binance also added two fiat currencies to the trading pairs with the Australian dollar (AUD) and Turkish Lira (TRY). These two options mean that Binance will see more fiat to crypto purchases for GALA and ATOM.

BNB Loses 5% in 24 Hours

With the addition of these new trading pairs, Binance is once again showing why it’s the number one crypto exchange in the world. Despite its various scuffles with authorities, the exchange has been able to maintain its lead against its competitors.

But the same can’t be said for BNB, its native token. After almost reaching a new ATH in November, the value has fallen significantly along with the rest of the market. In the past 30 days, it has lost around 21% of its value. 

Given more recent trends, its situation is not looking to change soon. BNB has suffered a 1.3% drop in 24 hours and currently trades at $447.

2022 Central & Eastern Europe Outlook: Sound Growth, but Deficits, Governance, Geopolitical Risks Are Concerns

Explainer video: Scope Ratings introduces its 2022 Global Sovereign Outlook

Download Scope’s 2022 CEE Sovereign Outlook (report)

We expect broad-based, if uneven, economic expansion in the 11 EU member countries of the region (CEE-11) to continue, marking aggregate calendar-year growth of 4.6% in 2022 – albeit somewhat slower than a 5.6% expansion this year. This includes: 4.1% in Poland next year (after 5.5% in 2021), 5.4% in Hungary (after 7.5%), 5% in Romania (after 7.2%), 4.8% in Croatia (after 8.8%). Slovakia (5.3% in 2022, after 3.7% in 2021), Bulgaria (4.8% in 2022, after 3% this year) and the Czech Republic (4.7% next year, after 3% in 2021) are seen bucking normalisation trends, with growth accelerating in 2022.

Outside the EU, Russia similarly grows a more moderate but nevertheless above-potential 2.7% next year, after 4.5% this year. However, Turkey is seen slowing sharply to 2.3% in 2022, after 10.8% in 2021, while Georgia normalises to 5.5% economic growth next year, after 9.8% this year.

A constraint remains elevated budget deficits of the region

One constraint remains still-elevated budget deficits preventing any meaningful reduction of government debt and exposing economies to further tightening in global financial conditions.

Budget deficits will have remained elevated around 5.5% of GDP on aggregate in the CEE-11 in 2021, after 7.1% of GDP in 2020, as governments have prolonged discretionary spending in support of households and business. As a result, public debt ratios peak in 2021 – around levels not seen since peaks of the global financial crisis – before stabilising and gradually declining from 2022. Altogether, an aggregate budget deficit of the CEE-11 shrinks to 3.8% of GDP in 2022.

Russia ought to get near a balanced budget over 2022-23. In Turkey, increasingly frequent economic crises have brought repeated requirement for the counter-cyclical use of budgetary resources. Scope sees Turkish general government deficits of 5.4% of GDP in 2022, further increasing to 6.4% in a 2023 election year, after a more-modest-than-anticipated 3.2% this year.

Quality of economic policies increasingly important given changing political landscape

Inflation is running above target across CEE markets, limiting the room central banks have to aid recovery through continued accommodation in monetary policies.

Under this context, the quality of economic policies is increasingly important for growth and sovereign credit quality in the region given a changing political landscape, prolonged fiscal adjustments, rising labour shortages, and evolving environmental and technological challenges.

Access of the CEE-11 to substantive EU investment funding provides an historic opportunity to raise longer-run potential rates of economic growth via expenditure on digitisation, infrastructure and climate change. Improved economic resilience and curtailed external-sector risk contribute to improving outlooks as concerns the Baltic states, Bulgaria and Croatia, the latter two benefitting from accession to the Exchange Rate Mechanism II and Banking Union of the European Union.

Even so, higher-than-usual policy uncertainty persists across some CEE-11 economies, notably in Poland and Hungary, where added tensions with the EU over the rule of law could result in further delay of EU financing and adversely impact growth and public finance outlooks. The CEE economies most integrated into global supply chains, such as Slovakia and the Czech Republic, whose economies are reliant on the shortage-hit automotive sector, face nearer-run slowdown in growth momentum.

Geopolitical tensions and sanctions risk impact outlook for Russia, while Turkey goes from crisis to crisis

Russia is benefitting from an improved outlook concerning commodity prices. Effective fiscal and monetary management has abetted stabilisation of its economy, while lowering exchange-rate volatility. These developments supported Scope’s earlier upgrade of Russia’s credit ratings to BBB+/Stable.

However, geopolitical tensions are running high. Latest US efforts to defuse crisis in Ukraine might prove crucial, but Russia faces risk that further international sanctions are adopted, weighing on investment and growth outlooks. The significance for the credit ratings of Russia from sanctions risk hinges at this stage upon whether Russia’s approach on Ukraine favours maintaining a status quo, attenuating outstanding conflicts, or, instead, favours escalating a geopolitical crisis with risk of more punitive sanction repercussions from western counterparties.

In Turkey, looser financial conditions have anchored very high growth of 2021 at expense of the intensification of macroeconomic imbalances, manifested in the depreciating lira and inflation of above 20%. Turkey’s policy framework, as President Recep Tayyip Erdoğan has consolidated personal control over government and the central bank, is inconsistent with the economy’s long-run sustainability.

For a look at all of today’s economic events, check out our economic calendar.

Levon Kameryan is Senior Analyst in Sovereign and Public Sector ratings at Scope Ratings GmbH. Giacomo Barisone, Managing Director at Scope Ratings, co-wrote this article.

Turkey Nears Tipping Point: Capital Controls, Use of Reserves Unlikely to Prevent Lira Depreciation

The government in Ankara has few options available so long as President Recep Tayyip Erdoğan remains committed to lowering borrowing rates to accelerate economic growth and raise exports even under conditions of inflation running above 20% – eroding ordinary citizens’ disposable income.

Either the currency crisis gets bad enough for President Erdoğan’s advisors to say “enough is enough”, at which stage the central bank changes personnel and belatedly hikes rates – even if temporarily – to ease current selling pressure on lira and check inflation.

Or, as an alternative, the central bank resorts to “de-globalising” the currency – reintroducing capital controls, limiting access to foreign currency within the economy, seeking foreign currency from domestic banks and foreign allies, and going through reserves in defence of the currency – in line with what occurred between 2018 and 2020 when Erdoğan’s son-in-law Berat Albayrak ran economic policy.

The government’s exchange-rate pain threshold appears higher than in the past

Any decision to cut rates again, even as global central banks are generally tightening, at the monetary policy committee of 16 December could place even further pressure on lira, already having lost around half its value since February.

Inflation rose to 21.3% YoY in November, sending real policy rates to -5.2%, among the lowest in emerging markets.

Stemming this lira slump is critical but the government’s exchange-rate pain threshold appears higher than it was in 2018 or late 2020 when the central bank last hiked rates sharply to circuit break a currency rout.

Erdoğan has significantly consolidated his influence over economic decision-making by this stage, including monetary policy. The president appears much more “dug in” during this crisis with loyalists running the central bank and treasury and repeated mantra of how falling interest rates support growth and employment. In addition, the political stakes are much higher ahead of centenary elections due by 2023. Erdoğan and his Justice and Development Party are trailing in polling, so any public admission of failure on the economy such as vis-à-vis a rates reversal is likely to be seen by Erdoğan as damaging to credibility.

Observing steps of use of forex reserves and capital controls in slowing lira losses

We are already observing the government pursuing a “de-globalisation” strategy in using forex reserves to intervene in exchange-rate markets – after having previously committed not to do so – and adopting specific forms of capital controls to discourage depositing in foreign currency and selling of lira, to allow for lower rates while slowing currency losses. The catch is that defending lira via such a strategy is unsustainable long run.

The policy is expensive, and only buys time. Turkey racked up foreign-exchange reserve losses of over USD 100bn over 2018-20. Net reserves ex-swaps, standing at negative USD 42.3bn as of October, represent a lasting testament to consequences of this policy framework, which would be risky to attempt again with the domestic sector losing confidence in value of lira, precipitating further capital outflows.

Risk of political crisis with elections looming, on top of economic and lira crises

Instead of helping Erdoğan’s political cause, a lower interest rate policy to engineer higher economic growth appears to be aggravating his likelihood of re-election. The weak currency is instead exacerbating high inflation and loss of consumer purchasing power, which are central causes of popular discontent. Moreover, rate cuts are resulting in much higher long-end rates, tightening monetary conditions and exacerbating economic instability – hitting the poorest the hardest.

Should Erdoğan not alter course and electoral defeat were to appear inevitable, political tensions are likely to grow over 2022 and 2023 if the president turns to less democratic routes to hold to power. Risk of a political crisis, in addition to economic and lira crises, represents a vulnerability with bearing on B/Negative Outlook foreign-currency credit ratings we assign to Turkey.

For a look at all of today’s economic events, check out our economic calendar.

Dennis Shen is a Director in Sovereign and Public Sector ratings at Scope Ratings GmbH.

 

2022 Global Economic Outlook: Covid-19, Structural Inflation, Monetary Tightening Challenge Global Outlook

Explainer video: Scope Ratings introduces its 2022 Global Sovereign Outlook

Download Scope’s 2022 Sovereign Outlook (report).

Entering 2022, new variants of Covid-19, elevated inflation, and withdrawal of fiscal and monetary support present risk for the robustness of recovery. GDP is seen, nevertheless, continuing to grow above trend over 2022 of 3.5% in the US, 4.4% in the euro area, 3.6% in Japan and 4.6% for the UK, even if, in most cases, normalising to a degree from elevated early-recovery growth of 2021. China is seen growing nearer trend of 5%.

Amid an uneven recovery, we see momentary slowdown over Q4 2021 and Q1 2022 across many economies, if not in some cases temporary output contraction, as countries of Europe reintroduce generally lighter restrictions on basis of renewed rise in Covid-19 cases, including those associated with a new Omicron variant. But we see economic rebound regathering traction by the spring of 2022.

As expected, full economic normalisation has remained vulnerable to renewed introduction of restrictions as transmissible virus variants challenge public-health systems, though we see severity of virus risk for economic recovery continuing to moderate with time as governments adopt more targeted responses, virus becomes more transmissible but less lethal, and businesses and people adapt ways of doing business. Nevertheless, risk to the 2022 outlook appears skewed on the downside.

More persistent inflation, even as it begins to moderate, supports increasing monetary policy divergence

Inflationary pressure is likely to remain more persistent than central bank projections, running above pre-crisis averages even after price changes begin to moderate by next year. This is likely to compel a continued divergence of monetary policy within the globe’s core economies, with associated risk of crystallisation of latent debt and financial-bubble risk as central banks pull back.

This is especially true as regards the UK and the US, where inflation might continue testing 2% mandates, although much less the case for Japan of course, with the euro area somewhere in between with inflation potentially remaining under 2% over the long run.

By end-2022, policy rates of leading central banks are expected to similarly diverge: remaining on hold with respect to the ECB and the Bank of Japan but with rate hikes next year from the Bank of England and Federal Reserve. The ECB is seen halting the Pandemic Emergency Purchase Programme (PEPP) next year but adapting PEPP and/or other asset-purchases facilities to retain room for manoeuvre and smoothen transition in markets.

Higher inflation holds both positive and negative implications for sovereign credit ratings

Higher and more persistent inflation holds both positive and negative credit implications as far as sovereign ratings are concerned. Somewhat higher trend inflation supports higher nominal economic growth, helping reduce public debt ratios via seigniorage, and curtails historical deflation risk of the euro area and Japan. However, rising interest rates push up debt-servicing costs especially for governments carrying heavy debt loads and running budget deficits. Emerging economies, with weakening currencies and subject to capital outflows, are particularly at risk.

Substantive accommodation from central banks has cushioned sovereign credit ratings over this crisis, so any scenario of much more persistent inflation limiting room for monetary-policy manoeuvre is a risk affecting credit outlooks. Bounds in central bank capacity to impede market sell-off due to high inflation compromising monetary space may expose latent risk associated with debt accrued in past years.

Monetary innovation during this crisis has supported credit outlooks

As many central banks tighten monetary policy amid policy divergence, peer central banks that might otherwise prefer looser financial conditions may see themselves compelled to likewise remove some accommodation, otherwise risking currency depreciation. At the same time, with governments dealing with record levels of debt and central banks owning large segments of this debt, “fiscal dominance” may coerce moderation in speed of policy normalisation.

Monetary innovation over this crisis such as flexibility made available in ECB asset purchases supports resilience of sovereign borrowers longer run, assuming such innovations were available for re-deployment in future crises.

Emerging market vulnerabilities entering 2022, while ESG risks becoming increasingly substantive

Emerging market vulnerabilities are a theme entering 2022, amid G4 central bank tapering, geopolitical risk, and a slowdown of China’s economy. Debate heats up furthermore during 2022 around adaptation of fiscal frameworks for a post-crisis age, with potentially far-reaching implications as far as sovereign risk. Environmental, social and governance (ESG) risks are becoming increasingly significant – presenting opportunities and challenges for ratings.

Sovereign borrowers with a Stable Outlook make up presently over 90% of Scope Ratings’ publicly rated sovereign issuers, indicating comparatively lesser likelihood of ratings changes next year as compared with during 2021, although economic risks could present upside and downside ratings risk. Only one country is currently on Negative Outlook: Turkey (rated a sub-investment-grade B).

For a look at all of today’s economic events, check out our economic calendar.

Giacomo Barisone is Managing Director of Sovereign and Public Sector ratings at Scope Ratings GmbH.

 

Tech Sell-Off Continues

Gold, which peaked last week near $1877, has been dumped to around $1793. The tech sell-off in the US carried into the Asia Pacific session, and Hong Kong led most markets lower. The local holiday let Japanese markets off unscathed, though the Nikkei futures are off about 0.4%. Australia and India managed to post minor gains as the MSCI Asia Pacific Index fell for the fourth time in five sessions.

Europe’s Stoxx 600 has slid around 1.5% today, its fourth consecutive decline, but has clawed back nearly half the gains It is the longest retreat in two months. US futures are lower, with the NASDAQ leading the move. Near 1.64%, the US 10-year yield is at the upper end of this month’s range. Last month it reached 1.70%. European bond yields are mostly 4-6 bp higher, and peripheral spreads have widened a little.

The dollar is sitting in the middle of the major currencies. The dollar bloc, sterling, and the Norwegian krone, which are the risk-on, levered to growth currencies, are weaker. The euro, yen, and Swiss franc are little changed but firmer. The dollar briefly traded above JPY115.00 in Asia, without Tokyo, before being pushed back. The steady euro has taken some pressure off most of the regional currencies.

The Turkish lira has been in a virtual freefall following President Erdogan’s spirited defense of his efforts to drive down rates. There was around 10 lira to the dollar in the middle of November. Today, at its peak, there is about 12.48 lira to the dollar.

Asia Pacific

Over the weekend, Japan expressed willingness to cap its strategic reserves. Press reports indicated yesterday that India is amenable to coordinating a release of some of its oil stocks. South Korea may also participate. It has been under consideration for a couple of weeks, at least, in the US, and China appears willing to repeat September’s release of crude from its reserves. However, it seems naive to have expected OPEC+ to simply standby. January WTI posted a bearish outside down day ahead of the weekend by trading on both sides of the previous day’s range and settling below the previous session’s low.

Follow-through selling yesterday took it down about $1.20 from the close, but when OPEC+ announced that a coordinated release of the oil could prompt it to reconsider its own plans. It is to meet next week to review its strategy. Through yesterday’s low, January WTI had retreated by nearly 11% from the October 25 higher near $83.85. A band of resistance is seen between $78 and $80.

OPEC+ had previously agreed to boost output by 400k barrels a day per month to restore pre-pandemic output levels. That said, not all the members can produce their quota, leading to a shortfall. OPEC+, the IEA, and EIA all seem to agree that supply-demand considerations shift in next year, and the market will once again be in oversupply.

Moreover, OPEC+ argues that the real dislocation is not with oil as its with gas. The US imports about 2.9 mln barrels a day, India, about 4.2 mln, and Japan, about 3.1 mln barrels a day. South Korea imports around 2.5 mln barrels a day. Together it is around 12.7 mln barrels a day of imports. If together, 100 mln barrels are released, about eight days of imports would be covered. This is a high estimate. India, for example, has indicated it may release 5 mln barrels.

Australia’s flash November PMI was better than expected. Manufacturing edged up to 58.5 from 58.2, while services rose to 55.0 from 51.8. This produced a 55.0 composite reading, a gain from 52.1 in October. Recall, the pandemic and lockdown led weakness in the economy in the May-August period. The composite PMI bottomed in August at 43.3.

It has risen for three months but remains well off the peak in April of 58.9. Separately, New Zealand real retail sales were hit in Q3 by the social restrictions, but the drop was not quite as bad as feared. Reall retail sales fell 8.1% after a 3.3% increase in Q2. Economists (Bloomberg median) had anticipated a 10.5% pullback. The RBNZ meets the first thing tomorrow and is widely expected to hike 25 bp, to lift the cash rate to 0.75%. There is still a slight bias toward a larger move in the swaps market.

The dollar briefly traded above JPY115.00 for the first time since March 2017. We note that Japanese dealers were on holiday and did not participate in the move. As risk-off sentiment took over, the dollar was sold back to JPY114.50. Resistance in Europe has been found near JPY114.80. Note that there is an option for about $980 mln at JPY115.50 that expires tomorrow. The Australian dollar initially edged lower to almost $0.7210, its lowest levels since October 1 before steadying. A break of $0.7200 signals a retest of the late September low near $0.7170. Initial resistance is seen in the $0.7230-$0.7250 area.

The PBOC is sending plenty of verbal signals that it does not want to see strong yuan gains, and today’s fixing underscores that point. The dollar’s reference rate was set at CNY6.3929, wider than usual above the market expectation (Bloomberg) for CNY6.3904. The greenback is firm inside yesterday’s range. Caution is advised here as the PBOC could escalate its disapproval.

Europe

The flash EMU November PMI was better than expected. The aggregate manufacturing PMI rose to 58.6 from 58.3. The market anticipated a decline. The service PMI rose to 56.6 from 54.6, also defying expectations for a sequentially weaker report. The composite snapped a three-month slide and rose to 55.8 from 54.2. The cyclical peak was in July at 60.2.

A flash release is made for Germany and France. Germany manufacturing slowed slightly (57.6 from 57.8) and held up better than expected (Bloomberg median 56.9). Services actually improved (53.4 from 52.4). The composite rose to 52.8 from 52.0 to end a three-month downdraft after peaking in July at 62.4. French numbers were even better.

The manufacturing PMI rose to 54.6 from 53.6. The service PMI rose to 58.2 from 56.6. The composite improved to 56.3 from 54.7 to snap a four-month fall. Recall that yesterday the Bundesbank warned that the German economy may practically stagnate this quarter and that inflation may approach 6% this month.

The UK’s flash PMI was more mixed. The manufacturing PMI had been expected to have slowed but instead improved for the second consecutive month (58.2 from 57.8). Services were nearly as weak as anticipated slipping to 58.6 from 59.1. The composite eased slightly to 57.7 from 57.8, ending a two-month recovery from the June-August soft patch. Meanwhile, Prime Minister Johnson’s rambling speech yesterday hurt people’s ears, and in terms of substance, the changes to social care funding that may result in lower-income people having to sell homes to pay for support did not go over well. It is spurring talk of a possible cabinet reshuffle.

The euro has edged to a new low for the third session today, slipping to almost $1.1225 before catching a bid that lifted it back to $1.1275. There is an option for around 765 mln euros at $1.1220 that expires today. The nearby cap is seen in the $1.1290-$1.1310 area. The euro may struggle to sustain upticks ahead of tomorrow’s US PCE deflator report (inflation to accelerate). Sterling met new sellers when it poked above $1.3400. It has ground lower in the European session, and sterling fell to almost $1.3355. Note that the low for the year and month was set on November 12, slightly above $1.3350. We see little chart support below there until closer to $1.3165.

America

We suspect many pundits exaggerated the link between the renomination of Powell for a second term and the sell-off in US debt and technology shares. First, it was not a surprise. Second, it assumes a substantive difference in the conduct of monetary policy between Powell and Brainard. There isn’t. The difference was on regulatory issues and on the role of climate change. Third, the idea that the Fed may accelerate its bond purchases next month was sparked by the high CPI reading on November 10.

Yesterday, Bostic joined fellow Fed President Bullard. Two governors (Clarida and Waller) also seem to be moving in that direction (Waller may be faster than Clarida). The fact or the matter, nearly all of the high-frequency data for October, including employment, auto sales, retail sales, industrial production, and inflation, came in higher than expected. The US sees the preliminary November PMI today. It is expected to have risen for the second consecutive month after fall June-September.

The reception to yesterday’s US two- and five-year note auctions was relatively poor. The higher yields (compared with the previous auctions) did not produce better bid-cover ratios. Today’s the Treasury comes back with $55 bln seven-year notes and re-opens the two-year floater. Many observers see the debt ceiling constraint being likely an early 2022 problem rather than this year. Still, tomorrow’s sale of the four-week bill may be the test. Recall that at last week’s auction, the 4-week bill yield doubled to 11 bp.

Europe’s virus surge and social restrictions became a market factor last week. Many think that the US is a few weeks behind Europe. The seven-day infliction rate in the US rose 18% week-over-week. Several states, including Colorado, Minnesota, and Michigan, are being particularly hard hit. Nationwide 59% of Americans are reportedly fully vaccinated. However, it leaves about 47 mln adults and 12 mln teens unvaccinated.

The risk-off mood and the drop in oil prices are helping the US dollar extend its gains against the Canadian dollar. The greenback, which started the month below CAD1.24, is now pushing close to CAD1.2750 to take out last month’s high. A move above here would target CAD1.28 and then the September high near CAD1.2900. Still, the market is getting stretched, and the upper Bollinger Band is slightly below CAD1.2730.

The risk-off mood does not sit right with the Mexican peso either. The dollar settled above MXN21.00 yesterday, its highest close in eight months. The same forces have lifted it to MXN21.1250 today. However, the anticipated gain in September retail sales (0.8% Bloomberg median after a flat report in August) may not give the peso much support if the risk-off continues. The high for the year was set on March 8 near MXN21.6360.

This article was written by Marc Chandler, MarctoMarket.

Exclusive -Turkey’s State Banks Likely to Follow Central Bank and Slash Rates on Monday – Sources

The three big public lenders Ziraat Bank, Halkbank and Vakif Bank are expected to lower rates on corporate, individual, mortgage and other loans, the three banking sources told Reuters, speaking under condition of anonymity because they were not authorised to discuss it.

One lender sent an email to some staff on Friday, viewed by Reuters, notifying them of the plan to cut costs by some 200 basis points. Another senior banking source said state banks will on Monday reduce rates “significantly in order to match” the central bank’s 200-basis point cut in its repo rate.

Cemil Ertem, a chief adviser to the Turkish presidency and a Vakif Bank board member, said on Twitter that state banks had cut loan rates down to the central bank’s policy rate.

Ziraat Bank had no immediate comment. Halkbank declined to comment and a Vakif Bank spokesperson did not immediately respond to a request for comment on details of the plan.

Policy easing by a central bank typically triggers lower rates for borrowers, stimulating economic activity. But the size of last week’s rate cut to 16% shocked markets and was twice as sharp as the most dovish estimate in a Reuters poll.

It sent the lira to a record low against the dollar and boosted benchmark yields, including a jump in Turkey’s 10-year government bond to 20.53%.

INFLATION RISK

While the big state banks are expected to follow the central bank, the market reaction last week suggests that extending cheaper loans will be costly for them. And though a sharp drop in rates could help some businesses and consumers, many analysts say it also risks exacerbating rising inflation and lira depreciation which could soon force the central bank to reverse course and hike again.

The government’s Turkey Wealth Fund did not immediately comment on banks cutting borrowing costs. It fully owns Ziraat Bank, 75% of Halkbank and 36% of Vakif Bank, public data show.

The central bank declined to comment on the state bank plan or on any possible fallout.

Many analysts say the central bank’s credibility is tarnished by Turkish President Tayyip Erdogan’s publicly stated calls for lower rates in order to boost credit and exports, despite inflation running near 20% last month.

Governor Sahap Kavcioglu has said publicly that Turkey’s central bank sets policy independently. Last week the bank said it cut rates in part because inflation pressure is temporary.

A self-described enemy of interest rates, Erdogan has replaced much of the central bank’s top leadership this year. Turkey is now virtually alone in cutting rates while other central banks around the world are hiking to head off rising global price pressures.

‘RISK PERCEPTIONS’

State banks aggressively expanded credit last year to ease pandemic fallout.

But some private lenders say they are hesitant given the risks of stoking an economy expected to grow at nearly 10% this year, and possible defaults on companies’ foreign currency debt.

The chief executive of lender Isbank, Hakan Aran, said in a televised interview on Sept. 29 that credit costs will not fall unless inflation is brought down first.

“If state-run banks slash rates and turn on the consumer-lending spigot … the additional liras flooding the system will only drive more dollarisation – exacerbating financial and economic pressures,” said Emre Peker, a London-based director at Eurasia Group.

In its policy statement on Thursday, the central bank cited business’s difficulty in getting commercial loans due to tight monetary policy.

Central bank data shows that average rates on these loans has held near 20% this year, though one of the sources said it was between 17.5% and 18% at state banks. These rates are among those that banks are expected to cut on Monday, according to the three sources.

Thursday’s rate cut was the second by the central bank in two months, following a 100-basis-point cut in September. Policy easing has sent the lira tumbling 13% against the dollar since the beginning of September, to hit an all-time low of 9.75 in early trade on Monday, pushing inflation higher via imports.

Erich Arispe, Fitch Ratings senior director who covers Turkey, told Reuters on Friday that the jump in market yields after Thursday’s rate cut shows that “risk perceptions play a role in financing conditions” for Turkey.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting and writing by Jonathan Spicer; Editing by Daren Butler and Susan Fenton)

Turkish Lira Hits Record Low After Erdogan Seeks Expulsions

The currency had already hit record lows last week after the Turkish central bank (CBRT) cut its policy rate by 200 basis points, despite rising inflation, in a shock move derided as reckless by economists and opposition lawmakers.

The lira hit an all-time low of 9.75 by 18:40 GMT on Sunday, weakening from Friday’s close of 9.5950. Two bankers attributed the early weakness to Erdogan’s comments on Saturday. It has fallen nearly 24% so far this year.

“I worry … for Turkish financial markets on Monday. The lira will inevitably come under extreme selling pressure,” said veteran emerging market watcher Tim Ash at BlueBay.

“And we all know that (Central Bank Governor Sahap) Kavcioglu has no mandate to hike rates, so the only defence will be spending foreign exchange reserves the CBRT does not have.”

Erdogan said on Saturday he had told his foreign ministry to expel the envoys for demanding the release of businessman and philanthropist Osman Kavala, who has been held in prison for four years without being convicted.

By Sunday evening, there was no sign that the foreign ministry had yet carried out the president’s instruction, which would open the deepest rift with the West in Erdogan’s 19 years in power.

Erdogan’s political opponents said his call to expel the ambassadors was an attempt to distract attention from Turkey’s economic difficulties, while diplomats hoped the expulsions might yet be averted.

Turkey’s state banks were expected to cut borrowing costs on loans by around 200 basis points on Monday, according to three people with knowledge of the plan, following last week’s central bank rate cut.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Nevzat Devranoglu; Writing by Daren Butler; Editing by Alison Williams and Kevin Liffey)

Are the Technicals Anticipating a Soft US GDP Report? Could it be a “Sell the Rumor buy the Fact?”

Indeed, the greenback fell against all the major currencies, even the Japanese yen, against which it had reached new four-year highs (~JPY114.70) before pulling back. On the other hand, the Antipodean currencies and the Norwegian krone continued to lead the move against the US dollar. The Aussie rose to new three-month highs, while the Kiwi, Nokkie, and Canadian dollar saw four-month highs.

Emerging market currencies were more mixed than the majors. At the end of the week, Russia’s larger than expected 75 bp rate hike helped lift the rouble, the best emerging market currency, last week. It reached a 15-month high ahead of the weekend. The Chinese yuan reached its best level in five months last week.

On the other hand, the Turkish lira and Brazilian real came under intense selling pressure. Turkey’s central bank showed little concern about the lira’s exchange rate when it delivered a larger-than-expected 200 bp cut in the one-week repo rate. At 16%, it stands below the headline and core inflation rates (19.58% and 16.98%, respectively in September. The lira lost 3.7% last week and fell to a record low.

The lira dropped by 25% in 2020 and is off another 22.6% this year. Political and economic turmoil in Brazil gave Turkey a run for its money. The Brazilian real fell 3.3% last week, which almost doubled its depreciation this year to 8.00%. President Bolsonaro has lost the confidence of investors and local businesses. Brazil may report that inflation stabilized (above 10%) in October, ahead of the central bank meeting, which is widely expected to lift the Selic rate 100 bp to 7.25%. It would be the third such move this year after beginning the cycle with three 75 bp increases.

Dollar Index

The high for the year was set on October 12, near 94.55. It pulled back to around 93.50 early last week before consolidating. It met the (38.2%) retracement objective of the leg up that began in early September and came in about 93.55. The next important chart area is the 93.00-93.25. The momentum indicators are still headed lower, but prices have stabilized. A close back above 94.00 would suggest that minor correction is over.

The Dollar Index settled at the end of last month slightly below 94.25. If it does not recapture this by the end of next week, it will post the first monthly loss since July. The dollar’s losses may reflect some position adjustment ahead of a soft GDP report. However, the market could be vulnerable to a “sell the rumor buy the fact” as the market quickly turns its attention to the November 3 FOMC meeting and the start of tapering.

Euro

Although the single currency held above $1.16 since testing the $1.1570 area on October 18, the upside was limited to the $1.1670 area approached on October 19. Indeed, it has been confined to Tuesday’s range (~$1.1610-$1.1670) and traded in about a third of a cent range ahead of the weekend. The momentum indicators are pointing higher. Yet, the market lacks energy even though the five-day moving average cross above the 20-day moving average for the first time since mid-September.

The US 2-year premium over Germany rose for the sixth consecutive week and around 110 bp, it is the most since March 2020. It was closer to 200 bp before the pandemic. The ECB meets next week, but important decisions are not expected until the December meeting. The EMU reports Q3 GDP, and it is expected to have grown around 2% quarter-over-quarter. Lastly, rising energy prices and a weaker euro suggest that the preliminary October CPI risk is on the upside.

Japanese Yen

After rising to a four-year high around JPY114.70, the dollar appears to have entered a consolidation phase. It pulled back to about JPY113.40 ahead of the weekend. The weak close sets up a test on the JPY113.25 support area and then JPY112.75. We note that US yields remain firm, but the dollar-yen rate has become a bit less sensitive to it (the correlation has softened). The dollar’s four-week ascent against the yen ended last week with a roughly 0.65% pullback, which tested the trendline off drawn from the lows before last month’s FOMC meeting.

We have suggested that at least initially, the JPY114.50-JPY115.00 may mark the upper end of a new range for the dollar. If that holds, the market may have to fish for the lower end of the range, and perhaps it may be encouraged by a rally in US Treasuries either ahead of or in response to the Q3 GDP estimate, for which the Atlanta Fed’s tracker sees at 0.5% annualized.

British Pound

Sterling was practically flat last week despite the seventh consecutive weekly increase in the implied yield of the December 2021 short-sterling interest rate futures contract. The implied yield rose 10 bp to about 46 bp. In early September, before the surge in rates began, it was at 0.11%. Even at the end of the week, BOE officials (chief economist Pill) were still goading the market by saying a hike in November was “fairly balanced.”

Sterling’s rally, which began the month near $1.34, stalled around $1.3835 last week (fraying the upper Bollinger Band), just in front of the 200-day moving average (~$1.3850). This area also corresponds to the (50%) retracement of the sell-off since the May high ($1.4200). Momentum indicators are getting stretched but have not begun leveling off. Support is seen in the $1.3675-$1.3700 area.

Canadian Dollar

The Canadian dollar rose for the fifth consecutive week, albeit barely, and reached levels not seen since June. The market is aggressive in pricing in a hike several months before the Bank of Canada anticipated the output gap to be closed. The implied yield of the March 2022 BA futures rose 11.5 bp, marginally exceeding the increase of the previous two weeks. At 0.795%, it is 23 bp on top of the December 2021 contract yield.

The Bank of Canada meets next week and may subtly push against speculation of an early hike. After falling slightly below CAD1.2290, the US dollar reversed higher but again encountered selling pressure near CAD1.2385. Both the MACD and Slow Stochastic appear to have leveled off in oversold territory. However, it probably requires a move above CAD1.2400-CAD1.2425 to suggest a corrective phase as opposed to consolidation.

Australian Dollar

The Aussie rose 0.6% last week, its third weekly advance. The move extended its gains to 3.3% this month. It settled last month around $0.7225. It is not just against the US dollar; speculative participants have driven the Aussie up on the crosses, including the yen and euro. The $0.7500 area corresponds to the (50%) retracement objective of the slide from early May that began by $0.7900 and bottomed in late August close to $0.7100.

The next (61.8%) retracement is found just shy of $0.7600, but before that, the 200-day moving average (~$0.7565) must be overcome. The momentum indicators are stretched, and the Slow Stochastic has already begun curling over. The Aussie finished last week below its five-day moving average for the first time this month. Initial support is seen around $0.7450, and a break signals a move to $0.7400. If that goes, there is room for another cent pullback.

Mexican Peso

The peso extended the previous week’s gains that had halted a four-week slide. Indeed, the peso’s nearly 0.75% gain last week put it near the best performers in the emerging market universe. Anticipation of more aggressive rate hikes, even before the bi-weekly CPI, reported before the weekend, accelerated more than forecast. The peso may have also benefited from a rebalancing of portfolios away from Brazil, where neither the political nor economic environment is favorable. The sell-off in bonds, stocks, and currency gives the sense that foreign investors are joining domestic investors in abandoning President Bolsonaro.

The Brazilian real managed to fall nearly as much as the Turkish lira (~3.3% vs. 3.6%). Before the weekend, the US dollar recorded a new low for the month (MXN20.1250) ahead of support seen near MXN20.10. A break sets up for a test on more important support around MXN20.00. The MACD and Slow Stochastic reflect the strong downside momentum. The latter has begun entering oversold territory. Mexico reports September trade, employment, and Q3 GDP next week. Growth is expected to have shifted lower to around 0.5% from 1.1% and 1.5% in Q1 and Q2, respectively.

China

If we begin by acknowledging that the yuan is closely managed and observe that it has risen four consecutive weeks to levels not seen since June, it seems reasonable to conclude that officials desired some yuan strength. And that strength should be kept in perspective. It is a little less than 1% this month. Still, the 0.8% gain last week was more than the cumulative gains of the previous three weeks and was the biggest advance since the last week of May when the dollar’s three-year low (~CNY6.3570). The dollar finished last week near CNY6.3835.

Some speculate that Beijing’s efforts to secure energy supplies and dampen commodity prices are consistent with a stronger currency. However, the volatility of commodities overwhelms the exchange rate volatility that PBOC officials tolerate. Also, the exchange rate is a blunt instrument, creating unintended consequences. Some demand for the yuan may have stemmed from the dollar bond issuance last week (four tranches for $4 bln). The momentum studies on the offshore yuan are stretched.

This article was written by Marc Chandler, MarctoMarket.

Marketmind: No Escaping the Inflation Beast

A look at the day ahead from Dhara Ranasinghe.

Data on Thursday showed China’s factory gate prices grew at their fastest pace on record in September, a day after figures showed another solid increase in U.S. consumer prices.

The take away from markets is that transitory or not, central banks are likely to respond to higher inflation sooner rather than later.

And with minutes from last month’s Federal Reserve meeting showing policymakers’ growing concern about inflation, investors have again brought forward rate-hike expectations.

Fed Funds futures have pulled forward expectations for the first hike from late in 2022 to almost fully price a 25 basis point hike by September.

In addition, money market pricing suggests the Bank of England could move before year-end, the cautious European Central Bank could tighten next year and the overtly dovish Reserve Bank of Australia could raise rates by end-2023 — a trajectory that doesn’t gel with the central bank’s guidance.

Singapore’s central bank on Thursday unexpectedly tightened monetary policy, citing forecasts for higher inflation.

Markets, having priced in higher inflation and a tighter monetary policy outlook, appear to be in a calmer mood in early Europe. Asian shares rallied overnight, European and U.S. stock futures are higher too. U.S. Treasury yields, while a touch higher, are holding below recent multi-month highs.

Still, China property shares fell as investors fretted about a debt crisis in the sector.

The Turkish lira, at record lows versus the dollar, is also in the spotlight after Turkey’s President Tayyip Erdogan dismissed three central bank officials.

Key developments that should provide more direction to markets on Thursday:

– BOJ policymaker rules out stimulus withdrawal even after economy recovers

– Taiwan’s TSMC posts 13.8% rise in Q3 profit on global chip demand surge

– Japan dissolves parliament, setting stage for general election

– Data: Spain harmonized inflation rate(Sept), Canada manufacturing sales (Aug)

– United States: Initial Jobless Claims (Oct), Jobless Claims 4-week Average, PPI (Sept), NY Fed Treasury Purchases 22.5 to 30 years, 4-week and 8-week T-Bill Auction

– Central Banks: Fed’s Bowman, Bostic, Barkin, Bullard, Daly and Harker, ECB’s Elderson, and BoE’s Tenreyro and Mann speak

– Earnings: UnitedHealth, Bank of America, Wells Fargo, Morgan Stanley, Citigroup, US Bancorp, Walgreens Boots Alliance, Fast Retailing, Domino’s Pizza.

(Reporting by Dhara Ranasinghe; Editing by Rachel Armstrong)

 

Turkey’s Erdogan Overhauls Monetary Policy Committee, Lira Hits Record Low

It said those dismissed were deputy governors Semih Tumen and Ugur Namik Kucuk, along with another MPC member, Abdullah Yavas.

Erdogan appointed Taha Cakmak as a deputy central bank governor and Yusuf Tuna as an MPC member, it said.

Analysts viewed the move as fresh evidence of political interference by Erdogan, a self-described enemy of interest rates who frequently calls for rate cuts.

The lira weakened to a record low of 9.1900 against the dollar after the announcement, a loss of 1% on the day. It has weakened about 19% so far this year, driven by concerns about monetary policy.

It later pared some of the day’s losses, to stand at 9.1325 at 05:33 GMT.

Last month, the central bank unexpectedly cut its key rate to 18% from 19% despite annual inflation of nearly 20%, sparking a new selloff in the lira, which was also hit by the dollar strengthening against other currencies.

The MPC overhaul came after the presidency said on Wednesday evening that Erdogan had met Central Bank Governor Sahap Kavcioglu, publishing a photo of Erdogan standing next to him.

OPPOSITION

A source told Reuters that both Yavas and Kucuk had lately opposed some decisions taken by the MPC, while Kucuk had also been against reserve sales to support the lira in previous years.

“Kucuk had a sentence at the MPC that is still remembered at the bank: ‘The lira’s stability, reputation and the price stability that comes with these are prerequisites for economic growth and development based on productivity. Growth provided by other means will not be permanent,'” the source said.

“‘If you keep the interest rate lower than where it needs to be today, the level you have to raise the interest rate to tomorrow will be higher than the level it needs to be today,'” the person quoted Kucuk as saying.

“I think it is a loss for the (central bank),” the source said of the removal of the members.

Kavcioglu said this week that the rate cut was not a surprise and had little to do with the subsequent lira sell-off.

The bank’s next policy-setting meeting is on Oct. 21.

Last week, three sources familiar with the matter said Erdogan was losing confidence in Kavcioglu, less than seven months after he sacked Kavcioglu’s predecessor, and that the two had communicated little in recent weeks.

Erdogan has made a series of changes to the MPC in recent years. He fired three bank governors in the last 2-1/2 years over policy disagreements, hitting the lira and badly harming the credibility and predictability of monetary policy.

“Firing central bank officials in the middle of the night without a very good explanation is not how you build central bank credibility or bolster market confidence,” one foreign investor said on Thursday.

Headline inflation hit a 2-1/2 year high of 19.58% in September, while a core measure – which Kavcioglu has been stressing over the last month – was 16.98%.

Erdogan appointed Kavcioglu in March after ousting Naci Agbal, a policy hawk who had hiked rates to 19%. Erdogan ramped up pressure for easing in June when he said publicly that he spoke to Kavcioglu about the need for a rate cut after August.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Daren Butler, Additional reporting by Ezgi Erkoyun, Nevzat Devranoglu, Jonathan Spicer and Ali Kucukgocmen; Editing by Dominic Evans and Stephen Coates)

Energy Costs Add to Emerging Central Banks’ Inflation Headache

In a bold response to the price pressures, the Czech National Bank (CNB) on Thursday raised its main interest rate by 75 basis points, its biggest hike since 1997. It cited rising energy prices as well as supply-chain disruptions and domestic factors like higher costs in owner-occupied housing and services.

The country’s prime minister said the hike would damage the economy, illustrating the dilemma emerging central banks face as they try to head off inflation, already running above target levels, while sustaining fragile economic recoveries from the COVID-19 pandemic.

Benchmark European gas prices have surged more than 300% this year due to factors including low storage levels, outages and high demand as economies rebound, dragging up wholesale electricity costs.

The Czech Republic, Poland, Hungary and Romania were more exposed to the rise than the rest of the European Union because energy and utilities account for a relatively large share of their consumer price index baskets while their electricity supplies are more exposed to carbon-intensive sources, Goldman Sachs analysts said.

Turkey has been clobbered too, with natural gas prices for industrial use and electricity production rising by 15% last month.

Consumer prices had generally grown by more in countries where the economic rebound had been faster between the third quarter of 2020 and the second quarter of 2021, said S&P Global Ratings lead economist Tatiana Lysenko, highlighting Poland, Hungary, Russia and Brazil.

“Inflationary pressures in emerging European economies are proving to be more persistent than we anticipated,” said Lysenko.

“EMEA central banks will continue to navigate a complicated landscape, seeking a balance between supporting the recovery and anchoring inflation expectations in an environment where supply-side pressures may last longer than previously anticipated.”

With higher global energy and food prices showing few signs of easing and the Czech Republic, Hungary and others also facing tighter labour markets, inflation pressures should linger.

Goldman Sachs forecasts inflation for the year at 4.5% in Romania, 3.9% in the Czech Republic and 3.7% in Poland.

The Czech central bank said more rate rises would follow Thursday’s big hike as it aimed to prevent people and firms from getting used to inflation overshooting its 2% target.

Hungary plans to tighten policy more too, with base interest rate hikes of 15 basis points in the coming months, deputy central bank governor Barnabas Virag said on Friday.

Virag’s comments and the Czech hike gave a boost to both country’s currencies, with the Czech crown hitting one-month highs against the euro.

Poland may also be tempted to deliver an earlier than expected hike, say analysts.

Citi analysts said they expect Poland to deliver its first rate hike in March or April 2022, but they added that faster-than-expected hikes were possible if the bank became more confident about the strength of economic growth.

Turkey is likely to prove an exception, however. President Tayyip Erdogan’s desire for stimulus often trumps an orthodox approach to monetary policy.

Despite inflation running above target at 19.25%, the central bank last month slashed its policy rate by 100 basis points to 18%.

“Turkey is most vulnerable to higher energy costs as they have historically caused its balance of payments to deteriorate as import costs have increased,” said David Rees, Schroders senior emerging markets economist.

“The lira has come under pressure after the recent surprise rate cut and may continue to sell-off if energy prices rise further.”

The lira has slumped to record lows recently, reawakening memories of a 2018 currency crisis and eroding the earnings of Turks.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Tom Arnold; Editing by Hugh Lawson)

Turkey to Open 1,000 Markets to Counter High Inflation, Erdogan Says

Construction would quickly begin on the shops to provide Turks “cheap and high quality goods” and to “balance out markets”, he said, after consumer price rises to levels well above a 5% official target.

Frustrated by stubbornly double-digit inflation and sliding opinion polls, Erdogan’s ruling AK Party government has again begun pointing the finger at supermarkets and opened probes into potential exploitative pricing.

“We gave the order for about 1,000 of these businesses to open around Turkey, starting at 500 square-meters each,” Erdogan told reporters after visiting an agricultural credit cooperative outlet in Istanbul.

“These are places where prices are suitable to our citizens’ budgets,” he said of the commercial outlets.

Annual food inflation of nearly 30%, a global jump in commodity prices and the sharp depreciation of the lira currency have driven inflation higher throughout the year.

Inflation has remained in double digits for most of the past five years, eating into household earnings and setting Turkey well apart from emerging market peers.

Analysts say the central bank’s depleted credibility is primarily to blame for Turkey’s inflation problem. Erdogan fired the last three bank governors over policy disagreements.

Under pressure from the president for stimulus, the bank unexpectedly cut its key rate by 100 basis points to 18% last month, sending the lira to record lows.

Yet in recent weeks the government began high-profile inspections of Turkey’s largest supermarkets for “unreasonable pricing” and “consumer victimisation”. It also probed some restaurant breakfast prices in the eastern province of Van.

Vice President Fuat Oktay said on Saturday that increasing food production in villages is vital to head off exploitative pricing.

In early 2019 – on the heels of a currency crisis that sent inflation soaring – the government opened its own markets to sell cheap vegetables and fruits directly, cutting out retailers it accused at the time of jacking up prices.

For a look at all of today’s economic events, check out our economic calendar.

(Editing by David Clarke and Frances Kerry)

Marketmind: E-Day and Central Banks Galore

A look at the day ahead from Karin Strohecker.

Whether or not the payment is made, few harbour hopes that China’s overextended property sector – a dominant force in Asia’s corporate bond market – will escape disruption. In turn the hit to the country’s financial system, commodity imports and economic growth is bound to be felt globally.

And there’s little solace to be had from a more hawkish Fed, likely beginning to trim its monthly bond purchases as soon as November. At the end of two-day meeting on Wednesday, the Fed also signalled interest rate increases may follow more quickly than expected as its turn from pandemic crisis policies gains momentum.

Autumn storm clouds are also gathering elsewhere with the U.S. debt ceiling nearing and the flu season approaching fast in many parts of the world.

But for today, optimism prevails.

Evergrande shares rose as much as 32% in Hong Kong after its chairman sought to reassure retail investors, many Asian markets are trending higher. Both European and U.S. stocks futures point to cautious gains with crude oil futures rising and the dollar taking a breather.

The central banking marathon continues with policy makers in the U.K., Switzerland, South Africa, Turkey and Norway all due to give their verdict. Norway is set to become the first major western central bank to deliver post-pandemic rate hikes.

Data on PMIs coming in from around the globe meanwhile should give markets more hints to gauge the economic trajectory ahead.

Key developments that should provide more direction to markets on Thursday:

– Evergrande seeks to reassure retail investors as key debt deadline looms

– Central banks: Norway, UK, Switzerland, South Africa, Turkey, Taiwan, Philippines

– Bank of England expected to keep rates steady as inflation risks mount

– Fed issues quarterly accounts

– U.S. weekly initial jobless claims

– Auctions: US 4 week bills, 10-yr TIPS

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Karin Strohecker, editing by Dhara Ranasinghe)

Erdogan’s Waning Patience: Four Questions for Turkey’s Central Bank

The bank has kept its benchmark rate at 19% since March, when Erdogan installed Sahap Kavcioglu as its latest governor. That makes it one of the highest policy rates in the world – although so too is Turkey’s inflation rate, which touched 19.25% last month.

Ahead of a monetary policy meeting set for 2 p.m. (11:00 GMT) on Thursday in Ankara, here are four key questions:

IS A RATE CUT COMING?

After months of hawkish talk that allowed the lira to recover from an all-time low in June, the central bank has changed its tune in the last few weeks.

On Sept. 1 conference calls with investors, Kavcioglu did not repeat a longstanding pledge to keep the policy rate above inflation. Two days later, data showed inflation did indeed surpass 19% https://tmsnrt.rs/3yTLHBq, leaving real rates negative.

Kavcioglu also began downplaying this “headline” inflation figure and instead stressed that a “core” measure – which is lower – is more appropriate given the fallout from the pandemic.

In a speech on Sept. 8, he said a near 30% spike in food inflation represents “short-term volatilities”, so the bank will focus more on the core measure that dipped to 16.76%. He added that policy was tight enough and predicted a falling price trend in the fourth quarter.

Investors have taken all this as a dovish turn that suggests that rate cuts are on the way. Some have warned of a “policy mistake” if they come too soon.

Fourteen of 17 economists polled by Reuters expect easing to begin in the fourth quarter, with two, including the Institute of International Finance, predicting it will start this week.

“Though most expect no rate cut, the bank’s new guidance suggests it would not be surprising to see one on Sept. 23 if it takes a slight deceleration in core inflation as permanent,” said Ozlem Derici Sengul, founding partner at Spinn Consulting, in Istanbul.

HOW LONG WILL ERDOGAN WAIT?

Many analysts say Erdogan appears to be growing impatient for monetary stimulus, given loans are expensive and he faces a tough election no later than 2023. A few say a prompt rate cut could even signal plans for an early vote.

In recent months, the central bank has urged patience due to unexpected inflation pressure brought on by rising global commodities prices and a surge in summer demand as pandemic restrictions eased.

Despite the risk of currency depreciation https://tmsnrt.rs/3neUCLN and stubbornly high inflation, Erdogan will likely get what he wants soon.

A self-described “enemy of interest rates”, he ousted the last three central bank chiefs over a 20-month span due to policy disagreements.

In June, Erdogan said he spoke to Kavcioglu about the need for a rate cut after August.

In early August, he said “we will start to see a fall in rates” given it was “not possible” for inflation to rise any more.

Market tensions “are set to increase as President Erdogan continues to pile on political pressure for rate cuts, while inflation pressures are building,” said Phoenix Kalen, global head of emerging markets research at Societe Generale.

WHEN WILL INFLATION COOL DOWN?

Annual headline inflation should remain high through October and begin to dip in November due to the base effect of a jump late last year, since which it has continued to rise.

The government forecasts inflation will drop to 16.2% by the end of the year, while Goldman Sachs and Deutsche Bank see 16.7%. That should provide a window for at least one rate cut in the fourth quarter, most analysts say.

Yet because Turkey imports heavily, further lira weakness could push inflation higher and complicate or even thwart any easing. High import costs were reflected in the 45.5% annual jump in the producer price index last month.

Another risk is that the U.S. Federal Reserve removes its pandemic-era stimulus sooner than expected, which would raise U.S. yields and hurt currencies of emerging markets with high foreign debt, like Turkey.

Analysts say the biggest problem is the central bank’s diminished credibility in the face of political interference, leading to years of double-digit price rises and little confidence that inflation will soon return to a 5% target.

Ricardo Reis, a London School of Economics professor who presented a paper this month at the Brookings Institute, found that Turkey’s “inflation anchor seems definitely lost” based on market expectations data from 2018 to 2021.

HOW ARE INVESTORS AND SAVERS PREPARING?

When Kavcioglu downplayed inflation pressure earlier this month, the lira weakened 1.5% in its biggest daily drop since May. It has depreciated nearly 15% since Erdogan replaced Kavcioglu’s hawkish predecessor Naci Agbal in March.

Foreign investors hold only about 5% of Turkish debt after reducing their holdings for years.

Still, some say that rebounds in exports, tourism revenues and in the central bank’s foreign reserves make lira assets more attractive.

“With inventories so low in Europe, I can’t see how exports are not going to continue to do well,” said Aberdeen Standard Investments portfolio manager Kieran Curtis.

“It does feel to me like there is more of a move towards loosening from the authorities (but) I don’t think anyone is expecting a cut at the next meeting,” he said.

In Turkey, soaring prices for basic goods such as food and furnishings have prompted individuals and companies to snap up record levels of dollars and gold. They held $238 billion in hard currencies this month.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Ali Kucukgocmen in Istanbul and Marc Jones in London; Editing by Hugh Lawson)