TRY: Despite the upcoming restart of the cutting cycle, fat carry remains - ING

We expect the Central Bank of Turkey to leave rates unchanged today at 46% in line with market expectations, ING's FX analyst Frantisek Taborsky notes.

USD/TRY to move to 41.27 at the end of September

"The CBT has started easing liquidity conditions to normalise the average funding cost around the one-week repo rate. This leads to a decline in CBT funding costs to 46% from 49% ahead of today's meeting. Given this backdrop, we think the bank will wait for the July meeting and another inflation print to start cutting the policy rate."

"Regardless of the story, TRY remains the leader in carry within the EM space and our favourite currency. USD/TRY remains on its usual upward trajectory with some downside spikes in the last few weeks, however it is clear that FX policy remains unchanged for now."

"At the same time, we do not expect any changes in the coming months, and after the March TRY sell-off we believe the CBT is committed to keeping FX under control at least through the period of the cutting cycle restart. Therefore, the period at least until the end of summer should be safe for TRY longs. Looking ahead, we expect USD/TRY to move to 41.27 at the end of September and 43.00 at year-end."