Lira Hopelessness, Confusion & Vacillation in Markets

22 thg 10, 2021

We already wrote a month ago that Erdogan has finally found a man for the post of head of the Central Bank, who shares his unique view of monetary policy. The essence of this “vision” is as follows: a rate cut should help fight inflation. Don't ask why.

Considering that inflation in Turkey is about 20%, it was not difficult to predict the results of yesterday's meeting of the Bank of Turkey - the rate was lowered, and immediately by 2% from 18% to 16%.

The Turkish lira, however, for some reason lives according to classical economic laws and appreciated this maneuver, as it should - collapsed to the next historical lows. In general, while the Bank of Turkey is doing what it is doing, you can sell the lira from almost anywhere and earn guaranteed.

On the financial markets yesterday, after several days of synchronized movement, there was confusion and vacillation. The cryptocurrency market was selling, the dollar was correcting after the test of the key support of 93.50 in the Index, the oil moved away from the highs, but at the same time, the Fear Index rammed support at 15.50, and the US stock market, represented by the SP500, showed new highs.

In general, this situation shows that the single growth vector of all risk-taking in the financial markets has disintegrated. At least for now. Which at least testifies in favor of the ambiguity of the future. Growth is not the only form of movement.
Moreover, the markets did not have any reasons for doubts yesterday. On the contrary, the news that Evergrande raised 80+ million to pay off the first of the late payments is a reason for further massive growth in demand for risky assets.

In general, if yesterday showed anything, it is that everything can change at any moment and without any reason.