FxWirePro: Turkish Lira down 2 percent as Erdogan sacks central bank chief; further weakness likely

Turkish Lira is down almost 2 percent in Monday’s trading as Turkish President who is increasingly on a collision course with Washington over purchase of Russia’s S-400 missile defense system, sacked the country’s central bank governor, who at times defied the President’s demand for rate cuts despite higher inflation, as the economy slows down. The lira is currently trading at 5.73 per USD; though earlier in the day, it was down to 5.79 per USD.

In the early hours of Saturday, President Erdogan sacked his central bank governor Mr. Cetinkaya, who had served three years of his four-year term, was announced in a presidential decree published in the early hours of Saturday. He was replaced by his former deputy, Murat Uysal, a former executive at the state-owned Halkbank and its subsidiaries. According to insiders, the President and the central bank governor was not on the same page, as his demands for rate cuts were largely ignored.

Trade idea:

• Our calculations suggest that Turkish Lira, which is currently trading at 5.72 per USD, is set to decline further as rates move lower under the stewardship of Erdogan’s hand-picked successor at the central bank.
• We see Lira weakening to as low as 7.17 per USD area heading to the end of the decade.