On Saturday, 6 July, Turkish President Erdogan removed Central Bank governor Murat Cetinkaya from his job one year before the end of his four-year term. He was replaced by his deputy Murat Uysal. Financial markets reacted negatively – the stock market has lost -3% since and the TRY -2%. Further weakness and volatility is likely at least until the next monetary policy meeting scheduled for 25 July. Markets were already expecting a small rate cut, but now there is a risk that President Erdogan will seek to impose a much sharper cut. Should that happen, it will almost certainly lead to another marked slide of the TRY. Investors have already been concerned over reports saying that the delivery of a controversial Russian air defense system to Turkey could take place this week or next – a move that is likely to trigger U.S. sanctions on Turkey. Expect the TRY to remain under pressure from time to time, with further rounds of significant losses (and partial recoveries) likely.
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Weekly Export Risk Outlook 11 July 2019