Summary:

• Central Bank of Turkey is expected to raise (some) rates during today’s meeting, lira trades subtly lower in the morning
• Chinese FX reserves data could be conclusive whether the PBoC cuts or not RRR for banks
• US weekly jobless claims the sole reading of note from the US this afternoon

The one event is going to dominate trading during today’s session, and this is obviously the CBRT decision. The Turkish central bank is forecast to raise rates after an emergency rate hike delivered last month. On top of that, it’s worth glancing at the Chinese FX reserves data as it could decide on RRR levels for Chinese banks.

12:00 pm BST – Turkish central bank decision: The Turkish lira had been plunging over the past weeks until the CBRT delivered an emergency rate hike (300 bps) in May. Since then, the TRY has recouped part of its losses, but it keeps trading constantly close to its all-time lows anyway. In the meantime, the bank decided to simplify its monetary policy framework making the one-week repo rate its official policy rate (until then the unofficial policy rate was the late liquidity lending rate used to deliver backdoor rate increases). The consensus points that both overnight lending and borrowing rates should increase by 75 bps and 50 bps from 18% and 15% respectively. However, the repo rate is expected to stay unchanged (16.5%) and if it happened it would be incoherent with the latest CBRT’s assumptions that a deviation from the repo rate will be 150 bps.

tentative – Chinese FX reserves: Admittedly, it is not the first tier data this time it could be differently as the amount of China’s FX reserves could influence the PBoC decision with regard to a cut of RRR for banks. There is guesswork the bank could pull the trigger if the data produces a drop to the lowest level since August. In April foreign currency reserves totalled 3124 billion USD, and they are estimated to shrink to 3106 billion USD according to the median estimate of Bloomberg.

1:30 pm BST – US weekly jobless claims: The US labour market thrives, and it has been already reflected this week by a strong reading concerning newly created job vacancies (JOLTS) reaching its highest level on record. It mirrors the tightness of the jobs market, and over time ought to act in favour of higher wage growth (at least in theory, because nowadays some suspect that a weaker role of trade unions obstructs quicker wage growth). The reading is forecast to come in at 220k.

Central bank speakers scheduled for today:

8:40 am BST – Riksbank’s Johnick

4:00 pm BST – BoE’s Ramsden

tentative – BoC’s Poloz (he holds a press conference regarding the financial system review)

The TRY’s going nowhere ahead of the CBRT decision. Source: xStation5