Yesterday’s FOMC Meeting Minutes took a dovish tone, sending the U.S Dollar almost universally lower over recent hours in open trading markets. The dovish effect was mostly due to relaxed language over the possibility of higher than expected inflation data, even though the widely expected forthcoming rate hike was seen as confirmed to happen next month. The weaker greenback was notable in major markets where it has been in a strong upwards trend over recent months, such as in the USD/JPY (down 0.33%), the EUR/USD (down 0.31%), and the GBP/USD (down 0.40%) – as at the time of writing.
Yesterday’s other major items of note were British Inflation (slightly lower than expected, though it is hard to say whether this really had any effect on the Pound beyond what has been happening already), and a continuing spectacular freefall in the Turkish Lira which was halted, at least temporarily, by a hefty rate hike of 3%, putting the Turkish interest rate up to a large 16.5%. The Lira was down by almost 5% just over the day yesterday and came close to reaching a major psychological all-time high and milestone of 5 to the U.S. Dollar. It is still unclear whether this will be enough to halt the Lira’s slide, although the Turkish President has signaled that he won’t make any drastic changes to monetary policy which could rattle markets. Although I highlighted the potential of short Turkish Lira trades earlier this week, and while there were some nice profits to be made yesterday, the time may not be appropriate to open any new positions until we see a strong upwards movement which decisively breaks the 5 level, and I suspect this is unlikely to happen until at least a few weeks from now. Preventing panic among foreign investors will be a key priority for the Turkish government over the short term.