Turkey's local data next week will likely have no market impication

After a brief visit to below 3.00, USD-TRY shot up past 3.02 yesterday as EM assets came under pressure again. The rise in USD-TRY occurred despite surprisingly positive economic data out of Turkey yesterday, not only did Turkey's July current-account balance come in better-than-expected at $3.1bn, Q2 GDP growth was noticeably stronger than expected at 3.8% yoy vs. 2.4% in Q1. 

There are some one-off drivers and base-effects responsible for the strong GDP reading - GDP growth had dropped sharply last Q2; but even accounting for these, the data were strong. We note that industrial production growth accelerated to 4% yoy during Q2, so there is some consistency among numbers. 

"Why was the lira unimpressed? First, the Turkish PMI has fallen back to below-50 in August, which tells us that momentum faded in Q3. Secondly, there is concern on Turkey following S&P's downgrade of Brazil, the two countries have often been talked about in the same breath", says Commerzbank. 

Hence, minor surprises from local data will likely have no market implication in coming weeks. Rather next week's FOMC and its impact on EM sentiment will be key.