Turkish Coup Attempt Flounders

Daily Analysis - 18/07/2016

Failed Military Coup Sees Lira Climb Back From Friday’s Losses


Turkish President Erdogan managed to restore the control of his administration following a failed coup attempt that began on Friday before the end of trading.  Although details are still not entirely forthcoming, there is a long history of the military intervening in politics to protect democracy.  After sending the Lira slumping on Friday, the currency has since recovered modestly against the US dollar.

Turkish Administration Repels Coup Attempt

Markets were stunned late on Friday after an attempt by factions of the military to remove President Erdogan from power.  In a move that was widely decried by almost all of the members of parliament, Istanbul was temporarily shuttered after the group initiating the coup struggled to take control of the government.  However, government forces were quickly able to restore power, raising questions about whether the event was actually staged in an effort to consolidate Erdogan’s grip on the government.  However, the move does little to reverse the ongoing malaise in key economic sectors including tourism which is likely to stumble after the latest bout of terrorism and other sources of instability.  While growth remains amongst the highest in the globe, high unemployment and inflation continue to weigh on the outlook.  The Turkish Lira recovered during the weekly reopening, with USDTRY falling from Friday’s close of 3.0110 to 2.9374.


New Zealand inflation Steadies

Although the latest headline inflation figure from New Zealand missed expectations of 0.50% annualized expansion, the 0.40% print did match the prior quarter’s figures after reaching the lowest figure in years back during the fourth quarter.   The main source of the latest gains in inflation came from housing costs which remain on the rise, climbing by 3.30% during the period measured, driven by both new construction and rental prices.  The main detractor from inflation according to Statistics New Zealand was transport which remained under pressure thanks to falling gasoline prices and lower air travel costs.  However, on a monthly basis, the rebound in oil prices was a major source of upside pressure in the figure, with petrol prices rising 5.30% for the month of April.  The New Zealand dollar remains on the retreat following the announcement, with the NZDUSD pair briefly sliding below 0.7100 before ticking modestly higher.


China Housing Market on Fire

Recent economic indicators have painted a mixed picture of China after faltering trade was accompanied by stable gross domestic product figures.  In spite of concerns about the outlook and renewed speculation that the central government would consider a new round of stimulus, the latest housing data for the nation may derail further action on interest rates and fiscal stimulus.  According to the National Bureau of Statistics of China, new home prices surged by 7.30% year over year through the end of June, underscoring the impact of looser monetary policies.  With prices rising at the fastest pace since March of 2014 after 9-straight months of gains.  Even though prices are rising at a blistering speed, there is growing concern that the construction boom may reverse amid slowing investment.  USDCNH remains near closing levels from the prior week, trending near 6.7070.


Gold Retreats on Renewed Risk Sentiment

After making a considerable climb into the weekend following early reports of the coup unfolding in Turkey, gold prices are once more on the retreat following the culmination of events in Turkey and stronger risk sentiment across the globe.  With equity futures on the march higher since the reopening, gold prices are back below $1130.00 per troy ounce after rebounding marginally from earlier session losses.  Silver, which has been one of the best performing precious metals of 2016, is down -0.61% on the session, falling to just above the critical psychological level sitting at $20.000 per troy ounce.  Although economic news is expected to be limited during the session and Japanese financial markets are closed for Ocean Day, prices may find themselves under sustained pressure absent any catalysts to drive price momentum to the upside.


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