Lira move makes markets nervous – Commerzbank

As the market awaits the September CPI/PPI print from Turkey on Thursday, yesterday’s Istanbul retail inflation print turned out to be a disappointment, notes Tatha Chose, currency analyst at Commerzbank.

Turkish PMI could suggest a much-needed cooling of the economy

“This cost of living indicator rose nearly 4% month-on-month in September (59.2% year-on-year). National CPI (consensus) is expected to have risen by 2.2% month-on-month for the same period – based on the Istanbul figure, we now wonder if we could see an upside surprise on Thursday.”

“In any case, after seasonal adjustment, consensus expectations for core CPI stand at a fairly brisk 3% m/m, which represents a worrying rate of fresh price growth still underway in Turkey. In other words, surprise or no surprise, we need more visible inflation moderation for markets to remain constructive on the pound.”

“On the positive side, the Turkish PMI fell sharply in September – so this could suggest a much-needed cooling of the economy – a crucial precondition for any stabilization of inflation. All in all, the data from Istanbul makes us nervous. The movement of the pound in recent days suggests that the currency market shares our concern.”