Turkish central bank cuts rates again

The Turkish central bank cut its one-week repo rate by 100bps at its MPC meeting yesterday, taking the benchmark rate down to 37.0%. While the cut was not quite as large as the predicted 150bps, the decision still takes the one-week repo down to its lowest level since late 2024, down from a recent peak of 50.0%. Ongoing disinflation – y/y inflation was at a three-year low of 30.9% in December, compared with 75.5% in May 2024 – has given the TCMB room to ease policy, although the bank’s statement did highlight a risk that food prices might exert upwards pressure on headline inflation in January, and this likely explains the smaller-than-anticipated cut. Nevertheless, the central bank still expects further disinflation, ‘albeit at a moderating pace’, and further rate cuts are expected through the year – consensus projections put the one-week repo rate at 28.9% by December.

Turkish consumer confidence income improved in January to 83.7 from 83.5 a month earlier. Confidence held relatively steady across Q2-Q4 2025 and had materially improved from recent lows in 2023 when inflation was accelerating at a rapid pace. Manufacturing confidence was also resilient in January, rising to 101.6 from 100.8 a month earlier and its best level since April 2025.

US consumer spending data for November rose by 0.3% m/m according to data released overnight, holding on to the same pace it achieved in October. Personal income for November increased by 0.3% m/m from 0.1% in October. While the data is relatively old, it shows that consumer momentum in Q4 remained strong even amid a substantial cooling in the labour market. PCE inflation, the Fed’s preferred target measure picked up marginally to 2.8% in November from 2.7% previously, still some way away from the Fed’s 2% target levels. Core PCE was also at 2.8%. Markets are assigning virtually no chance of a cut at the FOMC meeting next week with one cut priced in by April.

Today’s Economic Data and Events

09:00 HSBC India PMI composite Jan

11:00 UK retail sales Dec m/m: forecast 0%

12:00 HCOB France composite PMI Jan: forecast 50

12:30 German composite PMI Jan: forecast 51.7

13:00 EC HCOB composite PMI Jan: forecast 51.9

13:30 UK S&P Global composite PMI: forecast 51.5

18:45 US S&P Global composite PMI: forecast 53

JN Bank of Japan target rate

Fixed Income

US Treasuries were weaker overnight as markets responded to the positive consumer data from the US. Yields on the 2yr UST rose 2bps to 3.6058% while the 10yr yield was near flat at 4.2449%.

Ma’aden is in the market with a USD 1bn sukuk at +105 while Al Masraf priced a USD 500m 5yr at +125.

FX

The US dollar lost ground overnight with EURUSD up 0.6% to 1.1755, now trading marginally positive year-to-date, while GPBUSD was up by 0.5% at 1.3501 and USDCHF pulled lower by 0.8% to 0.789. JPY was the relative standout among majors with USDJPY up 0.1% at 158.41 as markets fixate on the political events in Japan.

In emerging markets there was broad strength against the US dollar. USDINR fell by 0.1% to 91.6237 while USDTRY dipped marginally to 43.2734, looking through the 100bps cut from the Turkish central bank. Egyptian pound was the strongest gainer with a 0.5% drop in USDEGP to 47.148.

Equities

Benchmark equities had a positive session overnight with US markets higher. The Dow Jones gained 0.6% along with a similar sized move in the S&P 500 while the NASDAQ was 0.9% higher. European markets had a boost of 1.3% while the FTSE was up by about 0.1%.

Regional equity markets had a strong overnight showing. The DFM rallied 1.5% while the ADX was up by 1.4%. In Saudi Arabia, the Tadawul finished its final session of the week with a 1.7% gain.

Commodities

Oil prices fell overnight as geopolitical fears faded and the US reported a build in crude stocks. Brent fell 1.8% to USD 64.06/b while WTI was lower by 2.1% to USD 59.36/b. The EIA reported a 3.6m bbl build in crude inventories last week while gasoline stockpiles rose almost 6m bbl. Distillate stockpiles were also higher. Oil production was marginally lower at 13.7m b/d while implied demand dropped to 20.2m b/d, down 840k b/d week/week.

Gold prices tracked higher along with the rest of the precious metals complex overnight, just short of USD 5,000/oz.