By Vincent Mivelaz
After announcing its withdrawal from the Iran deal last Tuesday, the United States' decision caused further uncertainty in the Middle East region. The diplomatic confrontation between Israel and Iran keeps on tightening following Israel’s Prime Minister Benjamin Netanjahu declaration with regard to Iran’s engagement towards its nuclear program freeze.
The Iran deal is in danger though the European effort to maintain it could worsen its relationship with the US, who temporarily put aside trade tariffs against the Old Continent.
Recent Turkey current account balance deficit of USD -4.81 billion (prior: -4.52 billion) continues to expand, strongly impeded by a continued decline in goods trade (USD -4.6 billion) and employee compensation (USD -1.31 billion, at 3-years low). On the other side, positive numbers in services (USD +1.12 billion), though estimated below its 5-year average at USD 1.85 billion continue to support the current account balance.
Accordingly, the downtrend with regard to EM currencies continues, strongly impacted by continued risk-off effect. We expect the USD/TRY to maintain its strength, as long as no intermediation with regard to the Iran deal are found, adding up with Central Bank of Turkey relative inaction with regard to its required monetary policy tightening.
Currently trading at 4.32, USD/TRY regains strength following recent decline at 4.22 (10/05/2018 low), heading along the 4.35 range in the short-term.
Disclaimer: While every effort has been made to ensure that the datat quoted and used for the research behind this document is reliable, there is no guarantee that it is correct, and Swissquote Bank and its subsidiaries can accept no liability whatsoever in respect of any errors or omissions, or regarding the accuracy, completeness or reliability of the information contained herein. This document does not constitute a recommendation o sell and/or buy any financial products and is not to be considered as a solicitation and/or an offer to enter into any transaction. This document is a piece of economic research and is not intended to constitute investment advice, nor to solicit dealing in securities or in any other kind of investment.
Although every investment involves some degree of risk, the risk of loss trading off-exchange forex contracts can be substantial. Therefore if you are considering trading in this market, you should be aware of the risks associated with this product so you can make informed decisions prior to investing. The material presented here in not to be construed as trading advice or strategy. Swissquote Bank makes a strong effort to use reliable, expansive information, but we make no representation that it is accurate or complete. In addition, we have no obligation to notify you when opinions or data in this material change. Any prices stated in this report are for information purposes only and do not represent valuations for individual securities or other instruments.