ONE-TWENTY TWO: Trading Financial Markets
Exploring the poetry in financial markets for students of money and economy since the year 2000.
In early December, I was hopeful that the Turkish lira would finally find its footing. The Central Bank of the Republic of Turkey (CBRT) was aggressively hiking rates and currency reserves sat at record levels. The high interest rate (40% at the time) made betting on eventual currency appreciation appear worth the risk. While collecting … Read more
A week ago, the Central Bank of the Republic of Turkey (CBRT) hiked its policy interest rate another whopping 500 basis points to 40%. The response in currency markets was a collective yawn. The CBRT explained that while inflation performed in-line with expectations, “the existing level of domestic demand, the stickiness in services inflation, and … Read more
After Turkish President Recep Tayyip Erdoğan’s “war of economic independence” came to an official end, I waited for evidence that the Central Bank of the Republic of Turkey (CBRT) would get serious about fighting inflation. The monetary evidence may have arrived on August 24th in the form of a monster rate hike from 17% to 25%. In … Read more
Brutal Failure Turkish President Recep Tayyip Erdoğan’s “war of economic independence” has ended in a brutal failure. The president used his central bank to fight inflation with rate cuts and lost in spectacular fashion. This experiment with unconventional monetary policy severely devalued the Turkish lira (USD/TRY) and helped to generate massive inflationary pressures. The chart below … Read more
A month ago I asked “how long can a parabolic Turkish lira last?” The answer turned out to be a month. However, the path to the end included two false conclusions and a massive blow-off top. The trading in the Turkish lira (USD/TRY) provided a new lesson in parabolic price action. Parabolic trading is inherently … Read more