Rate decision from the Central Bank of the Republic of Turkey is the most interesting event today for FX traders (11:00 am GMT). CBRT is expected to cut the main rate by 100 basis points to 15.00% in spite of a nearly 20% YoY CPI inflation recorded in October. Turkish central bank has been very aggressive with cutting rates recently. A 100 basis point rate cut was delivered in September followed by an even bigger 200 basis point rate cut in October. Additionally, risks seem to be skewed to the downside for lira with potentially bigger-than-expected cut in play as Erdogan continues to exert pressure on CBRT. Erdogan said yesterday that as long as he is president, he will continue to fight with interest rates, suggesting that his unorthodox approach of fighting inflation with rate cuts will be continued. Unsurprisingly, Turkish lira slumped to a fresh record lows against US dollar and euro.
A look at the EURTRY chart at daily interval, we can see that the pair trades in a steep upward move that has accelerated following yesterday’s comments from Erdogan. The pair jumped above 12.00 for the first time in history yesterday. Daily high was reached slightly above 12.40 today and CBRT decision is yet to come. EURTRY exceeded the range of the previous upward impulse today and it could be a good moment for technical correction. However, a hawkish surprise would be required from CBRT, what is a highly unlikely outcome of today’s meeting.