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Lira slide towards 8-per-dollar highlights Turkey economic pressure points By Reuters

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© Reuters. FILE PHOTO: A gold dealer counts Turkish lira banknotes in Istanbul

LONDON (Reuters) – The Turkish lira’s move towards the 8-to-the dollar mark will compound its 25% slide this year, amplifying existing pressures on companies and the broader economy.

Below are three charts illustrating the pressure points for Turkey, where the currency is enduring its eighth straight year of losses, having lost more than 80% of its value in the past decade.

1/ PRIVATE SECTOR FX DEBT

Turkey’s external public debt burden is deemed manageable but its companies and financial institutions face hefty repayments of nearly $10 billion in the next two months.

“Further lira depreciation would distort corporate balance sheets more and thus would have negative impact on investment prospects,” said Ugras Ulku, head of emerging Europe research at the Institute of International Finance (IIF).

More currency weakness would constrain companies’ ability to increase investment at a time when stronger capital spending is crucial in order to improve productivity, employment, competitiveness and exports, Ulku added.

Graphic: Turkey private sector external loan repayments – https://fingfx.thomsonreuters.com/gfx/mkt/ygdvzkgrjpw/Turkey%20private%20sector%20external%20loan%20repayments.PNG

2/ INFLATION

Price pressures are a sore point for Turkey, which has a history of hyperinflation – overcoming it just 17 years ago. Below-inflation interest rates have failed to check price growth while offering little incentive to foreign capital, further weakening the currency in a country with a persistent current account deficit.

Data on Monday is expected to show inflation rose further in September.

“We expect the depreciation of the lira to be the main driver of the increase in inflation,” Goldman Sachs (NYSE:)’ Kevin Daly told clients. In fact, last month’s figures likely underestimated the pace of core inflation, given tax cuts in various sectors, he added.

Graphic: Turkey CPI and interest rates – https://fingfx.thomsonreuters.com/gfx/mkt/jbyprmajwve/Turkey%20CPI%20and%20interest%20rates.PNG

3/ NOT-SO-CHEAP OIL

International oil prices have dropped around 40% since the start of the year, providing some relief to importing nations. Yet lira weakness means Turkey has reaped just around half that benefit. Any further lira weakness would wipe out more of that gain.

Turkey’s import-to-GDP ratio stood at nearly 30% at the end of 2019, according to World Bank data, with fuel imports making up around 8% of those.

Graphic: prices in select EM currencies – https://fingfx.thomsonreuters.com/gfx/mkt/bdwpkknnapm/Crude%20oil%20prices%20in%20select%20EM%20currencies.PNG

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Forex

Gold Prices Wilt as Virus Spike Spurs Haven Demand. Biden Leading in Polls

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2020 Election, Gold Prices, Coronavirus Cases, Election Day – Talking Points

  • Gold prices may decline if rising Covid-19 cases stoke demand for haven-linked USD
  • Democratic nominee Joe Biden continues to lead in the polls with his 7-point average
  • XAU/USD price action turning more bearish; is the uptrend in danger of invalidation?

8 DAYS UNTIL THE US PRESIDENTIAL ELECTION

It is almost exactly one week until election day and the polls continue to indicate that Democratic nominee Joe Biden will take the White House. According to RealClearPolitics, the former Vice President is almost 8 points ahead of incumbent President Donald Trump. This figures falls in line with the rough 7-point average Mr. Biden has held for several months apart from a few brief interims of polling convergence.

2020 US Election Polls

Chart showing polling data

Source: RealClearPolitics

Virus Spike Souring Sentiment

Coronavirus cases around the US and world are dramatically spiking and bringing to light the much-dreaded premonition of a second wave hitting the globe in Autumn. With Congress locked in a bipartisan stalemate, lack of progress in fiscal stimulus negotiations has undermined confidence in economic stabilization and soured risk appetite.

How to Use IG Client Sentiment in Your Trading

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Over the past few days, equity markets have plunged while demand for the haven-linked US Dollar surged. In the process, the allure of anti-fiat hedges like gold fell as future inflation expectations dwindled. Looking ahead, the prospect of reimposed lockdown measures and more severe restrictions could be another election wildcard that investors have to contend with.

Gold Price Outlook

Gold prices may be on the verge of breaking a multi-week uptrend as swelling risk aversion from a spike in Covid-19 cases puts a premium on the US Dollar. This has come at the expense of the comparatively less-liquid precious metal which previously rose amid signs of economic stabilization and optimistic expectations of inflation.

Gold Prices – Daily Chart

Chart showing gold prices

XAU/USD chart created using TradingView

If the slope of appreciation is invalidated, immediate support may be found at 1875.70 where selling pressure may briefly abate. However, if that floor is also broken, the next level to be tested may be the inflection point at 1810.33.

— Written by Dimitri Zabelin, Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or@ZabelinDimitrion Twitter





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US Dollar in the Hot Seat as Election Nears

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USD PRICE OUTLOOK: ELECTION RISK, STIMULUS UNCERTAINTY, EQUITY EARNINGS & COVID-19 GUIDELINES KEY CATALYSTS FOR US DOLLAR VOLATILITY

  • The US Dollar looks primed for elevated volatility this week due to a collision of key risk drivers
  • DXY Index pivots higher as COVID-19 cases mount and market sentiment deteriorates broadly
  • USD price action is strengthening amid intensifying uncertainty around the election, stimulus

The US Dollar advanced broadly on Monday. Souring risk appetite largely explains the bid beneath top safe-haven currencies and latest boost to USD price action. This largely follows a breakdown in major stock indices. It appears that market sentiment is deteriorating primarily on the back of mounting COVID-19 cases globally and fading optimism for a fiscal stimulus deal. Not to mention, with a barrage of equity earnings on tap this week, and the November 2020 election right around the corner, traders could be unwinding risk exposure in light of heightened uncertainty.

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US DOLLAR INDEX PRICE CHART: DAILY TIME FRAME (19 JUN TO 26 OCT 2020)

US Dollar Index Price Chart USD Forecast

Chart by @RichDvorakFX created using TradingView

The collision of key macro risk drivers this week might exacerbate US Dollar volatility and contribute to lacking conviction for a directional bias. That said, there could be potential for the DXY Index to continue oscillating around its 50-day simple moving average until clarity emerges after the US election.

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If risk aversion gains traction, however, US Dollar bulls could attempt to eclipse last week’s high and make a push toward September’s top. On the other hand, breaching last week’s low might increase potential for USD price action to extend its bearish slide back toward multi-year lows, but this scenario seems less likely with the broader US Dollar bouncing off its lower Bollinger Band.

USD PRICE OUTLOOK: US DOLLAR IMPLIED VOLATILITY TRADING RANGES (1-WEEK)

USD Price Chart US Dollar Outlook Implied Volatility Trading Ranges

Yet, according to the latest US Dollar implied volatility readings, USD price action is expected to be relatively tame. US Dollar one-week implied volatility readings look relatively in-line with their respective 20-day averages and seem muted when ranked on a 5-year percentile basis as well. This highlights potential for trader complacency and larger-than-expected moves across major currency pairs if volatility accelerates on the back of fundamental catalysts noted above.

USD Forecast

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Also worth mentioning, the DailyFX Economic Calendar details several other high-impact data releases and risk events on the docket this week with potential of contributing to US Dollar volatility more broadly. EUR/USD price action might swing violently in response to the scheduled European Central Bank rate decision. GBP/USD could steal the spotlight as the latest Brexit headlines cross market wires. USD/JPY and AUD/USD both look susceptible to sizable reactions this week as well with upcoming inflation reports in focus. Options-implied trading ranges are calculated using 1-standard deviation (i.e. 68% statistical probability price action is contained within the implied trading range over the specified time frame).

Keep ReadingUS Dollar (USD) Presidential Election Performance May Prove Anything but Typical

— Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight





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Pound Holds Steady on Brexit Deal Optimism By Investing.com

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© Reuters.

By Yasin Ebrahim

Investing.com – The pound held steady against the dollar on Monday, shrugging off renewed demand for the safe-haven greenback on expectations the U.K. and EU will eventually reach a Brexit deal after both sides agreed to push out the deadline to reach a consensus. 

fell 0.13% to $1.3024.

Brexit talks, which resumed last Thursday, were extended to Wednesday, when EU Brexit negotiator Michel Barnier is expected to attempt to bridge some of the divide between the U.K. and EU.

Ahead of the talks, Barnier’s effort to clinch a deal could receive a boost on hopes German Chancellor Angela Merkel may be able persuade French President Emmanuel Macron to ease his stance on the key sticking point of fishing rights.

Britain has stressed that it prefers to take control over access to its waters, when the Brexit transition period ends. Macron, however, fears that a softer stance on fisheries could see French fishermen sacrificed.

The optimism on progress this week had been tempered somewhat following reports the U.K. is waiting until after the U.S. election to reveal its negotiation strategy as a Joe Biden victory could weaken Britain’s negotiation stance. Biden had previously stressed that a U.K.-U.S. deal would depend on Britain securing a deal with the EU.

British Prime Minister Boris Johnson, however, said Brexit and the U.S. election result were “entirely separate,” according to U.K. media reports.  

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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