Turkish Growth Surges Higher

Since the notable weakness during the third quarter of 2016 when Turkey experienced a coup attempt which catalyzed an economic contraction, the economy has made significant strides.  The latest quarterly gross domestic products for the three months ended in September highlighted the progress, with growth reaching 11.10% on an annualized basis.  While partly attributable to the passing of the prior year’s contraction, it also reflects the impact of the cheaper Lira and elevated inflation.  Household spending was a big contributor, rising by 11.70% during the period while being accompanied by higher fixed-asset investment, rising government expenditures, and more competitive exports.  However, with inflation at 12.98%, there is a strong possibility that the Central Bank will opt to raise rates from their current 8.00% to help tackle rapid price growth.  After trading mostly unchanged on Monday, USDTRY is edging below 3.8350, prolonging a near two-week pullback.

Despite the improving environment for oil and gas prices, the Norwegian economy is still struggling to reverse falling price growth that began after consumer price inflation experienced a multi-year peak in summer of 2016.  Since topping out at 4.40% in July of last year, inflation is now ebbing near 1.10%, highlighting the challenges facing the Norges Bank as it seeks to reach its 2.50% target.  At present, the Central Bank does not anticipate reaching the target in 2018, suggesting that no monetary tightening is going to be imminent as cooling inflation stymies rate hike prospects.  Even if the ECB decides to eventually life rates in 2018 or reduce easing, Norway is likely to lag any tightening efforts conducted in the Euro Area.  The Krone was one of the worst performing major currencies on Monday, with EURNOK rising as much as 1.40% on the session before pulling back to near 9.8500.