TRY: Lira's movement is making markets nervous - Commerzbank

While the market awaits Turkey's September CPI/PPI print on Thursday, the Istanbul retail inflation print from yesterday turned out to be a disappointment, Commerzbank's FX analyst Tatha Chose notes.

Turkish PMI might suggest a much-needed cooling off in the economy

"This cost-of-living indicator was up nearly 4% month-on-month in September (59.2% year-on-year). The national CPI is forecast (by the consensus) to have increased by 2.2% month-on-month for the same period - based on the Istanbul number, we now wonder if we might see an upward surprise on Thursday."

"In any case, after seasonal-adjustment, the consensus expectation for core-CPI works out to a rather rapid 3%m/m, which represents a worrisome rate of fresh price increase still ongoing in Turkey. In other words, surprise or no surprise, we need more noticeable inflation moderation for the markets to remain constructive on the lira."

"On the positive side, the Turkish PMI fell sharply in September - so, that might suggest a much-needed cooling off in the economy - a crucial pre-condition for any stabilisation in inflation. On balance though, the Istanbul data are making us nervous. The lira's movement in recent days suggests that the FX market shares our concern."