Turkey’s currency takes a hit after US suspends visa services
Tensions are growing between the United States and Turkey. Last night, both countries have suspended part of their visa services. Indeed, an employee of the US embassy has been arrested on charges of espionage at Istanbul. As a result, US and Turkey have decided stop issuing non-immigrant visas for Turkish travellers.
The USDTRY pair strongly surged (more than 6%) out of those decisions probably on escalation fears and has reached its highest level since April (3.80 TRY for one single dollar note). The Turkey-US relations are turning to a worse situation. Geopolitical tensions are strongly growing. Actually in the background, tensions are escalating because of the US support to Syrian Kurdish rebels which Turkey considers as a terrorist group.
We definitely believe this can reveal more underlying tensions as Turkey is getting closer and closer of Russia and Iran. In the short-term, the USDTRY may nonetheless bounce back lower as the situation unravels. Yet, we believe that global tensions are overall on the rise and should weigh on the TRY.
AUD’s stabilisation may be temporary
The Australian dollar held steady on Monday morning after tumbling more than 1% against the US dollar last week. The release of disappointing local economic data together with improving US ones, encouraged investors to unwind long AUD position.
Firstly, the Reserve Bank of Australia send mixed last week. Although Governor Lowe reiterated that economic growth continued to gradually pick up, he also mentioned that the recent strength of the Aussie could dampen economic growth as well as inflation. This was the first blow for the Aussie. Secondly, September’s retail sales came in well under median forecast, contracting 0.6%m/m compared to +0.3% expected. This was the second blow.
Last Thursday, AUD/USD broke its monthly range to the downside as it moves below 0.7787 (low from July 18th) and is currently trading at around 0.7760. Traders will most likely continue to trim long AUD position as the Fed is expected finally resumed its tightening cycle and start balance sheet reduction. However, with the US closed for Columbus Day, today will be slow and volume are expected to be thin.
