Although there was an abundance of important economic data released throughout the week, Turkey dominated the news wires after Turkish President Erdogan declared a 3-month state of emergency, giving himself and regional governors more consolidated powers. So far, the expanded powers have been used to seize institutions and arrest thousands of opponents tied to political dissident Fethullah Gulen. Moves by credit rating agency S&P to downgrade the status of Turkey’s sovereign debt in response have drawn a strong rebuke from President Erdogan and caused an accelerated exodus from Turkish assets. The Lira hit a new record low against the US dollar, with expectations that the trend will persist amid an uncertain outlook for the nation. Back in Europe, the European Central Bank opted against adjusting monetary policy, leaving interest rates and the pace of asset purchases on hold while discussing the need for a better plan to deal with nonperforming loans burdening bank balance sheets. Nevertheless, concerns are growing about the ECB’s ability to restore inflation and the supply of eligible assets that qualify for the ongoing purchase program. In response, the Euro fell to the lowest levels versus the US dollar since June, slipping back below 1.1000. Aside from the losses in the Euro, crude oil prices ended the week significantly lower despite the US Energy Information Administration report of another drawdown in onshore oil inventories. The combination of gasoline being stockpiled at a significantly accelerated pace combined with the drill rig count rising by 14 last week alone is raising anxiety about another potential inventory glut. As onshore storage availability runs out, price competition amongst major producers may be revived, potentially leading to a deeper slide in oil, with prices falling to the lowest since May.
