Trade idea:
Long USDTRY 2.9200 w. stop @ 2.8925
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There is considerable risk that the EU Turkey refugee deal will collapse in the coming weeks..
The deal negotiated and finalized on March 18th is now at risk as President Erdogan has sacked his PM Ahmet Davutogly who negotiated the deal.
Erdogan over the week made absolutely clear that he will not comply with the 72 conditions Brussels insisted on for VISA free travel into Europe.
Measures he will not comply with include preventing corruption and revision of the terrorism legislation to mirror the European standard.
The March deal was very much the work of Chancellor Merkel and she has come under massive attack at home for the deal as seen by recent polls where CDU/CSU coalition is losing out to AfD………
The Turkey EU Refugee situation will potentially overtake the Brexit vote in the UK as Europe's ability to pretend-and-extend is running out time.
The Brexit vote ( I'm writing my Brexit view this week), in my opinion, will only be catalyst, not a massive risk event in itself, on Europe's future. UK's "future" is not about in or out of EU, but about a massive budget and current deficit accumulated over last three decades and entirely financed by foreigners into a global market outlook where banking and real estate will be under pressure, not because of Brexit or not, but due to the ill managed transformation of the UK economy and over-dependence on banking and real estate – two sectors with exactly ZERO productivity……..
The fact PM Cameron got a deal from EU pre the vote means Europe today de facto has a two tier Europe. One set of rules for UK (even when staying in) and one for the rest. Post the June referendum more countries will ask for "special deals" as the refugees, the growing gap between ECB and politicians, and the likewise expanding divided between Germany and Club Med expands (Merkel and Germany shot down Italy's attempt to make European bond financing refugees)
Today we start another chapter in the Greek tragedy on more loans to Greece! The never ending story – the Greek "solution' will have to be a debt haircut, something totally unacceptable to Merkel who more than anyone seems to believe that in-action and buying time is the solution to all problems European.
The key however market wise – remains Turkey. I have been long fan of Turkey asset (Not Erdogan!) – arguing the real rates is too high and as long as USDTRY trades sub- 3.05/3.06
I NO longer have this view- the Turkish stock market has performed well – as EM market – but have dropped significantly over the last week:
And 10 YR bond rates have reversed higher:
The market is busy scare-mongering for and against BREXIT, meanwhile the refugee situation, the ECB killing growth in Europe through sub-zero rates remains unchallenged except in the polls. There is as I have said before a BIG RISK that the "social contract" will be FORCED re-negosiated due to the ill-advice of buying time……Time is the only commodity we can't buy, maybe its time for the politicians and central bank to wake up to fact fact.
The guarantee is that both the political and market noise is increasing……even for the most tone deaf policy makers globally,
Safe travels,
Steen Jakobsen
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