Asian Currencies Trade Sideways as Dollar Stabilizes, Yen Weakens Ahead of Japan Election 
Bank of Canada Holds Interest Rate at 2.25% Amid Trade and Global Uncertainty 
Australia’s December Trade Surplus Expands but Falls Short of Expectations 
Federal Reserve Faces Subpoena Delay Amid Investigation Into Chair Jerome Powell 
Thailand Inflation Remains Negative for 10th Straight Month in January 
RBA Raises Interest Rates by 25 Basis Points as Inflation Pressures Persist 
Bank of Japan Likely to Delay Rate Hike Until July as Economists Eye 1% by September 
Oil Prices Slip as U.S.–Iran Talks Ease Supply Disruption Fears 
Trump Extends AGOA Trade Program for Africa Through 2026, Supporting Jobs and U.S.-Africa Trade 
US-India Trade Bombshell: Tariffs Slashed to 18% — Rupee Soars, Sensex Explodes 
Bank of England Expected to Hold Interest Rates at 3.75% as Inflation Remains Elevated 
Gold Prices Slide Below $5,000 as Strong Dollar and Central Bank Outlook Weigh on Metals 
JPMorgan Lifts Gold Price Forecast to $6,300 by End-2026 on Strong Central Bank and Investor Demand 
After CBRT’s rate cut in last week, Moody’s downgrading has been the double whammy for USDTRY, as the pair has been spiking considerably.
President Tayyip Erdogan unsettled markets briefly on Friday when he appeared to focus on the central bank, remarking that Gulenists (FETO) will be removed from the central bank too and that the MPC should lower rates progressively. These remarks, however, should be viewed in context -- Erdogan was being asked questions while abroad -- he should be expected to reiterate his views on a wide range of topics; this does not necessarily amount to stepping up his rhetoric.
Following the failed coup, he also asked bank managements to lower mortgage rates, which banks duly did. Hence, Friday's remark about banks lowering lending rates does not constitute a departure either. Overall, the remarks portray only a slight more urgent tone, perhaps because the economic data have weakened markedly. We continue to expect CBT to cut rates twice more by 25bps in the next two months.
In addition, late Friday evening Moody's downgraded Turkey's credit rating to junk status. We expected downgrades to manifest due to the deteriorating growth outlook and Moody's didn't disappoint, citing the growth deterioration and doubts about the ability to service external debt. In terms of market reaction, we can expect weakness in both TRY and cash bonds. We don't expect a severe reaction in CDS space as Turkish CDS already trades at sub-investment grade levels. All told this was an inevitable decision in our view. Low rates of growth and a poor domestic political backdrop are hardly conducive to a benign investment climate.
While we had already anticipated USDTRY’s upswings in our previous write up and recommended the option strategy accordingly.
For more reading on our previous analysis please follow below weblink:
Well, 1% OTM calls expiring on 21st of this month (that have been advised in the above strategy) have shown almost more than 9% returns (i.e. from TRY 2718 to TRY2965).
Technically, after testing trendline support, the pair has formed a gap up candle that has spiked above DMAs which is the bullish sign. We could foresee prevailing upswings to drag further towards 3.16 levels upon breach above resistance of 2.9939 levels. Consequently, the OTM options are most likely to expire in the money on before expiration.
