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Stocks bide time, CBRT hikes and jobless claims up next

Fawad Razaqzada Fawad Razaqzada 18/11/2020 Linkedin Twitter
Stocks bide time, CBRT hikes and jobless claims up next Stocks bide time, CBRT hikes and jobless claims up next
Stocks bide time, CBRT hikes and jobless claims up next Fawad Razaqzada Fawad Razaqzada Linkedin Fawad Razaqzada Twitter
  • Stocks were down for the second day but bouncing off the lows at the time of writing – more gains for value stocks likely amid vaccine optimism
  • The Turkish lira jumped as the central bank head raised rates as expected –  watch out for a big drop in EUR/TRY over time as the interest rate differential between Eurozone and Turkey grows (see below for more)
  • Except for vaccine news, there’s not much else on the agenda
  • US weekly jobless claims are expected to print 707,000 and continuing claims are seen falling further
Stocks in bullish consolidation

Continuing the recent trend, the markets have remained in a relatively tight range, after Wall Street ended lower for the second straight day on Wednesday, which basically reversed a two-day rally. So, while it may look like equity investors are more concerned about the new lockdown measures to stop the spread of the coronavirus than they are hopeful about prospects for a vaccine, let’s not forget that this consolidation comes on the back of a sizeable two-week rally, especially for value stocks. As the major indices remain near their recent highs, this recent price action could therefore be regarded as bullish consolidation, rather than a bearish reversal.

The hesitation to break further higher for the major indices makes some sense. Clearly, some investors were happy to take profit and re-assess the situation after the first announcement of the effective vaccine development from Pfizer and BioNTech gave the markets a big shot in the arm. The subsequent updates from Moderna on Monday and today from Oxford, whose vaccine candidate showed a strong immune response in old adults, have added to the optimism we are heading to more normal times ahead, keeping the bears at bay. It is quite possible therefore that the rally could soon resume, especially for the lagging European markets as more and more investors become convinced that the lockdowns will soon be over.

As the vaccine race continues, the need to develop and approve one cannot come soon enough, with the hospitalizations in the US and elsewhere continuing to rise along infections.

Turkish delight for lira as new CBRT head hikes rates sharply

As widely expected, Turkey's central bank hiked interest rates by a huge 475 basis points to 15% earlier today under the leadership of the newly appointed governor, Naci Agbal. The lira, which had been rising in anticipation of the hike, extended its gains further by about 2% against major currencies. The lira has become one of the best performing currencies among emerging market peers over the past couple of weeks, after being the weakest for several months.

The lira hit a new all-time low a few weeks ago after the CBRT kept policy unchanged instead of raising rates to dampen surging inflation. Erdogan has long been an advocate of low rates, but after the nation’s currency kept plunging to record lows, inflation rose to uncomfortable levels and the economy suffered, he finally succumbed to pressure to change tack. He replaced his son-in-law Berat Albayrak by Lutfi Elvan as the new Finance Minister and got rid of the former central bank governor and replaced him by Mr Agbal, who today decided to hike borrowing costs sharply. Erdogan has said that he will stand by the actions of the new finance minister and central bank governor “in every step they take,” although just yesterday he again re-iterated how much he hates high interest rates.

EUR/TRY could drop big amid widening rate differential

As interest rates in Turkey are one of the highest in the world, traders are piling into the lira to take advantage of the comparatively higher returns. Turkish assets could rise further in value if the new central bank governor and finance minister can hopefully dampen inflation and bring back credibility. The TRY could find tailwind support from news of the vaccines which has helped to lift the mood towards all risk assets, including emerging market currencies.

With the European Central Bank President, Christine Lagarde, promising to deliver a big monetary stimulus package in December the interest rate differential between Turkey and Europe could widen further. Thus, the EUR/TRY could be the one to watch for further downside potential as investors warm towards the lira and other Turkish assets.

EUR/TRYSource: ThinkMarkets and TradingView.com
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Meet our contributors
Mohammed Zidan
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Mohamed Zidan
Chief Market Strategist, Dubai

Mohamed Zidan is a chief market strategist in Dubai and CFA Level III candidate. He reports to London office and has more than eight years of experience focusing on Forex, Commodities, Indices and global economic developments as well as central bank policies and intermarket analysis. worked as FX Analyst, and Strategist in several different organizations and for various departments. He holds a bachelor’s degree from Cairo University in Egypt. Mohamed Zidan is a regular guest on several major TV networks such as; CNBC Arabia, Fran24 Arabic, Alarabiya , Dubai TV, Sama Dubai, Skynews Arabia, Saudi National News, and Egypt National news.

Zidan presents insight to the markets movements, holds open discussions and relays possibilities related to the world’s financial market and economies.

Mohamed Zidan has been invited as a guest speaker for several international seminars. Zidan provides daily and weekly outlook for the markets. His experience ranges from currencies, commodities, stocks and options. he applies a top-down, global macro approach combined with price action to generate trade ideas and anticipate the next move.

Victor Golovtchenko
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Victor Golovtchenko
Global Macro Analyst, Sofia

Victor Golovtchenko has been analysing and trading foreign exchange markets since 2004, and is actively involved in the online media space since 2014. His tenure as a Senior Editor at a major brokerage industry news outlet was followed with a breakthrough into the financial news space with the brand new TradeStar website.

As an affectionate macro-focused analyst, he has an integrated framework to look at financial markets as a whole, identifying gaps between currencies, stocks, bonds, and other asset classes to get a core complete picture of the macroeconomic environment.

Fawad Razaqzada
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Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Mohammed Zidan
Mohamed Zidan
He has more than eight years of experience focusing on Forex, Commodities, Indices and global economic developments as well as central bank policies and intermarket analysis.
Victor Golovtchenko
Victor Golovtchenko
Victor Golovtchenko has been trading on the foreign exchange markets since 2004, and is actively involved in the online media space since 2014. His tenure as a Senior Editor at a major brokerage industry news outlet is followed with a breakthrough into the financial news space with the brand new TradeStar website.
Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.

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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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