Turkish Lira back to future

Turkey's current account deficit and high inflation resulted in one of the most meaningful accumulations of foreign liabilities across EM in recent years. If unwound, Turkey's short term liabilities could wipe out all of their FX reserves. This is even before taking into account the funding of a still wide current account deficit. 

RBC Capital Markets noted that it will maintaine a 3.00 target for USD/TRY for September.

The election's results are both concerning and hopeful. The election's result is hopeful because it shows democracy in Turkey has capacity to dwindle support for a party as powerful as AKP.

"Since then, inflation surprised to the upside and CBT has kept liquidity tight. We believe CBT will seek to maintain tight policies well into next year. The election's result will likely provide room for CBT tighten if necessary", RBC Capital Markets noted.