Turkish Elections: Lira reaction will likely be sharply positive initially if opposition wins – Commerzbank

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Ahead of highly consequential presidential and parliamentary elections coming up on 14 May, and possibly extending to 28 May, Commerzbank’s FX forecasts are only symbolic for now.

Lira to ultimately break out of its recent low-volatility state if Erdogan wins

“If Erdogan wins, we expect the Lira exchange rate to ultimately break out of its recent low-volatility state produced using regulations and numerous capital controls.”

“If the opposition Nation’s Alliance wins, the market reaction will likely be sharply positive initially. But the coalition is made up of smaller parties, which came together only to oust Erdogan. The market’s enthusiasm could fade if the coalition were to run into cooperation or policy implementation challenges, which would remind markets that Erdogan can return to power.”

“Ahead of this outcome and in view of potential market dislocation, our forecasts are symbolic for now.”

Source: Commerzbank Research