All the market focus this morning has been on Turkey and more importantly it’s currency, as it took yet another hit on the open today. It’s traded down to a record low against the greenback this morning with UsdTry trading above 7.2400 and liquidity is thin to say the least. This all comes on the back of US sanctions and a lack of tangible response from the Turkish central bank and government, investors now fear that only extreme measures can now bring the country back from a financial meltdown. Turkish President Erdogan is standing firm against the US and the markets and will probably not seek IMF help, leaving investors hoping that the central bank will look to raise rates despite the president’s strong views on that subject.
The fear across the currency markets is that volatility will spread across the EM’s pairs and into the majors, Euro took a significant hit on Friday as the FT reported the extent of European Bank exposure to Turkey and the single currency broke through the recent downside trend support at 1.1500. The Aussie also came under pressure as contagion spread across markets with the global stock indices mainly finishing up in the red.
Looking ahead to todays trading and with next to nothing due on the data front, the market will continue to focus on the moves we saw on Friday and this morning’s open. With the stock markets expected to open on the back foot, risk trades will once again come under pressure and traders will watching Asian EM’s to see how they react as well as any further pressure translating through to the major currencies.