Turkish lira weakens 2.1pc after cenbank governor sacked

Government sources cited Erdogan’s frustration that the bank has kept its benchmark interest rate at 24

Powell will provide further cues on the near-term outlook for monetary policy this week at his semi-annual testimony to the US Congress.

In currency markets, action was in the Turkish lira which weakened to 5.8245 per USA dollar, the lowest since June 25 after Turkey's central bank governor Murat Cetinkaya, whose four-year term was due to run until 2020, was replaced by his deputy Murat Uysal.

Cetinkaya was a close political ally of Berat Albayrak, the Ministry of the Economy and President Erdogan's son-in-law and drew criticism previous year for failing to raise interest rates fast enough to hold back galloping inflation.

Last year, Cetinkaya had raised the benchmark interest rate by 750 basis points in order to support the lira. By December, the Turkish lira had recovered somewhat, regaining almost 14 percent of its value against the dollar.

Akmehmet stated that the firing would lead to the perception that Turkey's economic policy was following Erdogan's will, going against the long-standing principle that a central bank should be independent. "They will make the decision", Erdogan told reporters.

Global equities have generally been bolstered by expectations that central banks will keep interest rates at or near record lows to boost economic growth.

TRY is being offered on concerns over central bank's independence.

"I would've expected a larger fall in the currency today".

Ankara's deal with Moscow has been a major source of tension between Turkey and Washington.

The Turkish president is getting desperate.

However, Ash said it was odd to replace him with a high-ranking official in the central bank rather than choosing someone outside the institution who would be more in line with fiscally orthodox rules.

All in all, the markets will look very skeptically on the sacking of Cetinkaya, especially as there are potentially more troubled times ahead.

United States officials have encouraged Turkey to buy the American-made Patriot missile defense system instead, but Erdogan has refused to pull back from the S-400 deal. Washington has warned that if Turkey goes ahead with the order, the U.S. could impose economic sanctions. Even worse from an investor confidence perspective is a country whose monetary policy will be controlled by an individual with a very loose grasp of economics that includes deities.

Ash stated that the sanctions would likely be tougher this year. At the same time, Turkey's current account deficit is in check. "This [firing] is not helpful - that's pretty clear".



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