Phoen x Kallen, strateg st, Soc ete Generale

Dünya Executive - - REPORT -

The external env ronment favors carry trades: Global cond t ons rema n broadly support ve of y eld-seek ng behav or and carry trades, barr ng a basel ne level of unpred ctab l ty n geopol t cs. Ahead of Turkey’s 2019 general elect on, pol cy makers are l kely to cont nue pr or t z ng both econom c performanc­e and f nanc al stab l ty. Turkey’s growth has def ed market expectat ons, wh le the government s cont nu ng w th st mulus measures and the Central Bank of Turkey has been v g lant n ma nta n ng t ght l qu d ty pol cy. D ff cult Brex t negot at ons have proven fru tless so far, and the outlook s d scourag ng. Moreover, the UK growth momentum has slowed am d a real ncome squeeze on households and an nvestment freeze among bus nesses. Threats of a US government shutdown (due to the ntractab l ty of talks over the US debt ce l ng, border wall fund ng) may generate some r sk avers on detr mental to EM currenc es, nclud ng the l ra. Flare-ups n geopol t cal tens ons (between the US and Russ a/North Korea/ Ch na) can also prec p tate fl ght-to-haven behav or that would underm ne the recommende­d pos t on of shorten ng GBPTRY. Add t onally, d osyncrat c domest c news-flow that s negat ve for Turkey (d plomat c fall-outs, terror sm, downbeat econom c developmen­ts) or pos t ve for the UK (dov sh s gnals regard ng Brex t d scuss on, stronger-than ant c pated econom c performanc­e) would also mpa r the trade’s prof tab l ty. (Sept. 5)

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