The Lira touched a new low versus the US dollar on Friday as confidence in the country’s outlook continues to worsen. Besides struggling with the impact of weaker tourism revenues and softer investment due to political conditions, Turkey’s continued purge of civil servants has drawn stern condemnation from the European Union. In a stunning move, the European Parliament opted to put a hold on talks of Turkey’s EU membership. More concerning is rising inflation while unemployment remains high. The Turkish Central Bank raised rates for the first time in years, bringing the key rate up to 8.00%. However, this contrasts sharply with Erdogan’s goals of lowering rates to ease business conditions, putting the Central Bank on a collision course with the President. The reaction is likely to be further losses in the Lira as Central Bank faces an own uphill battle.
Turkey Surprises Markets with a Rate Increase
Daily Analysis - 25/11/2016