Reduced political uncertainty improves Turkish lira sentiment

Turkish lira rallied in this morning on the back of the election results, initially gaining 5.4% against the USD versus Friday's closing levels. However, over the morning, the lira has fallen a back a bit but is still up 3.5% versus the USD. It is also clear that the results are good news in terms of near-term prospects for supporting local consumer confidence and restoring international trust despite the challenging global environment and the fragile emerging market universe.

"USD/TRY forecasts has been kept unchanged (3M 3.12, 6M 3.10 and 12M 2.80) for the time being, as we await more clarity on the future government's commitment to implementing structural reforms and reducing pressure on the central bank (CBRT). However, a strong downside risk to the current USD/TRY forecasts is seen (upside for the TRY), as the election outcome, in combination with improving macro fundamentals such as the shrinking current account deficit, could support the rally further", says Danske Bank.