Turkish central bank holds rates steady again

The Turkish central bank kept its one-week repo rate unchanged at 50.00% yesterday, marking the fifth straight month that the benchmark interest rate was kept on hold. The decision was widely anticipated, as even while real rates remain deeply negative (headline CPI inflation was 61.8% y/y in July), price growth has been slowing from recent peaks and is expected to continue moderating. In its statement, the TCMB noted that ‘domestic demand continues to slow down with a diminishing inflationary impact’, although it noted that, as elsewhere, services inflation is likely to lag. While further hikes are unlikely, the bank did caution that it would tighten policy should a ‘significant and persistent deterioration in inflation be foreseen.’ Rate cuts are likely some distance off still, with the statement noting that tight policy will be maintained until a ‘sustained’ decline in inflation is realised. In Governor Fatih Karahan’s speech on inflation given earlier in August, he reiterated the bank’s forecast that headline inflation would fall to 38.0% by the end of the year.

Annual CPI inflation in Canada was at 2.5% y/y in July, as predicted and down from 2.7% in June. On a monthly basis, prices were 0.4% higher compared to June, compared with deflation of 0.1% previously. Core inflation was 2.4%, with the data in general pointing towards further rate cutting from the Bank of Canada.

Annual CPI inflation in Oman accelerated to 1.5% y/y in July, up from 0.8% the previous month. This marked the fastest pace of annual inflation since March 2023, with food and non-alcoholic beverage prices up 4.5% y/y and housing costs up 1.7%. In other regional data released yesterday Egypt’s trade deficit narrowed to USD 2.87bn in June, from USD 3.57bn the previous month.

Today’s Economic Data and Events

22:00 US FOMC minutes July 31 meeting

Fixed Income

• Yields fell across the curve on US treasuries yesterday. The 2yr yield dropped 8bps to 3.9836%, while the 10yr fell 7bps to 3.8067%.

FX

• The dollar weakened for a third straight session yesterday, falling 0.4%, and while it has steadied this morning it is trading at levels last seen at the start of the year as expectations of Fed rate easing rise.
• Both EUR and GBP have as a result been trading at their strongest levels since July 2023, as EUR added 0.4% to 1.1130, and GBP closed 0.3% higher against the greenback at 1.3034.
• JPY also strengthened against USD yesterday, by 0.9% to 145.26.

Equities

• The equities rally took a breather yesterday ahead of the Jackson Hole speeches, with no meaningful data releases moving markets. In the US, all three benchmark indices declined on the day, with the Dow Jones and the S&P 500 both closing 0.2% lower and the NASDAQ losing 0.3%.
• There were gains locally, as the ADX added 0.1% and the DFM 0.4%. In Saudi Arabia, the Tadawul closed up 0.7% while Egypt’s EGX 30 added 2.0%.

Commodities

• Oil prices continued to fall yesterday, with US inventory numbers adding to the downwards pressure. The American Petroleum Institute reported a 347,000 gain in US crude stockpiles.
• Brent futures fell 0.6% to USD 77.2/b, while WTI prices dropped 0.4% to USD 74.0/b.
• Gold prices hit a new record high yesterday as the rally continues. Spot gold closed up 0.4% at USD 2,513/troy oz leaving it up 22.0% ytd.