Turkish Lira – rebound or relief rally?

Turkish Lira has been one of the top performer today as latest snap election on Sunday resulted in single party majority rule after months of political uncertainty.

• Stock are up around 5%, since the victory has been quite surprising and Turkish Lira as of now is up around 3.5% against Dollar. In Sunday's election President Tayyip Erdogan's party won majority of the votes close to 50%, which would comfortably give them majority in Turkey's 550 members parliament.
• Last election on June 7, resulted in nor majority there has been no consensus among political powers over coalition and led to increase in violence among the Government and Kurdish militia after three years of truce.

Now the real question is whether today's performance if Turkey's assets can be called as rebound or relief rally.

• Given the uncertainty for months over Turkey's political future, today's knee jerk reaction seems to be more of relief rally than actual rebound. Election result may have boost short term sentiment but unlikely to change economic performance or result in long term relief in Turkey's stressed markets.
• External headwinds for turkey, such as weakness in China, interest rate hike in US and sour sentiment towards emerging markets remain broadly unchanged.
• Internal factors such as weakness in productivity, lack of infrastructure and structural high inflation doesn't look like to subside any time soon.

Moreover, current government's top priority has been to change the constitution, which would provide more presidential power to Mr. Erdogan, all others for the time being come second.

As of latest, Turkish Lira is trading at 2.813 against Dollar.