How is Dollar/TL Moving Ahead of S&P Evaluation and Inflation Data?
As uncertainty continues in the Turkish economy, market participants are focused on the inflation data for October, which will be announced on Monday. S&P's credit rating assessment is another matter being closely watched in the markets, with expectations for a one-notch upgrade and a stabilization of the outlook.
On the other hand, following the inflation data for September, expectations for interest rates in November have been pushed back, while a potential interest rate cut in December is still on the table. This has further increased the importance of the October inflation figures.
Among the highlights of this week, we have observed data from the Central Bank of the Republic of Turkey (CBRT). The CBRT's data shows that as of the week ending October 25, gross reserves remained stable at $159.4 billion. The CBRT continues to maintain strong reserves through tight monetary policy applications. The Treasury plans to borrow 630.4 billion Turkish lira against a domestic debt service of 404.6 billion lira during the November-January period. Additionally, a decision published in the Official Gazette has increased the withholding tax rates on Turkish lira deposits and funds; the tax rate for deposits with a maturity of up to 6 months has risen to 10%, and for those with maturities of up to 1 year, it has increased to 7.5%.
The Manufacturing PMI and Istanbul's inflation figures have been released: What is the state of economic indicators? The Istanbul Chamber of Industry reported that Turkey's Manufacturing PMI rose to 45.8 in October but remained below 50, indicating a continued deterioration in business conditions. The downward trend in the sector since April has led to weak demand and a slowdown in exports. While food-related sectors experienced growth, overall input costs continued to rise. The highest rate of decline in input stocks since May 2020 was recorded.
According to the Istanbul Chamber of Commerce (ITO), the Wholesale and Retail Price Indices showed lower rates of increase in October compared to the previous month. The Wholesale Price Index increased by 43.07% year-on-year, while the Retail Price Index rose by 59.10%. These inflation figures may shed light on the inflation data to be announced on Monday.
Credit rating expectations and market reactions S&P's credit rating assessment may have significant short-term effects on TL assets and exchange rates. Meanwhile, following the increase in withholding tax rates, the dollar/TL has begun to test slightly above the 34.30 level. In the stock markets, weak buying is creating selling pressure at resistance levels. Unless the important resistance level of 9,050 is surpassed, upward attempts are expected to remain weak.
In the domestic market, critical developments such as the October inflation data and the Inflation Report, which will be announced next week, are on the horizon. As the upward trend in the exchange rate continues modestly, stock markets are trading above the 8,850 level.
The dollar index began to show a buying trend again today after a declining movement throughout the week, ahead of the Non-Farm Payroll data. The increase in global demand for the dollar is contributing to the upward pressure on dollar/TL. Additionally, due to the decrease in euro demand, the euro/TL is also seen to be moving in negative territory by 0.25%, hovering around the 37.30 level.
Following a negative closing yesterday, the gold market is moving positively today, with gram gold experiencing a partial increase, accounting for currency effects, rising by half a point to around 3,035 TL.