No clear and present danger

TURKEY - In Brief 28 Aug 2017 by Atilla Yesilada

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We will start our official coverage next week, but seeing how EM currencies became suddenly popular once again after Yellen and Draghi speeches at Jackson Hole, I felt it was incumbent upon me to give a run-down on political risks to determine whether they could derail the TL rally. The brief answer is NO. While political risks are proliferating and rising, there is no clear and present danger which would disrupt market sentiment. On the negative side, Cosmic Strategist doesn’t believe in the TL rally, either. At home, Erdogan and AKP at large backtracked from threats to have CHP leader Mr. Kilicdaroglu arrested. CHP united around its chairman and Kilicdaroglu was not daunted by the threat. AKP might have realized that his arrest would have served no practical purpose. The bickering between Ankara and Berlin is the daily fare of the press, and in fact it is reported that Germany blocked some European Investment Bank loans to Turkish companies. However, other EU members and the Commission demur to impose additional sanctions on Turkey. Merkel is too busy winning the upcoming election. The topic of Turkey will be attended in earnest in October. Erdogan’s pronouncement of joint military action against PKK with Iran was immediately shot down by the Iranian Revolutionary Guard. With pro-PKK Kurdish militia YPG stuck in front of DAESH-held Syrian town of Raqqa, Ankara would not dare to attack Kurdish cantons. Ankara will have to eventually enter Syria a second time, but that is a story for later. Ankara vehemently opposes the upcoming independence referendum in Iraqi Kurdistan, along with Baghdad, Iran and U.S. but Barzani can’t afford to back down. The vote to secede at the...