All of you, please fasten your seatbelts. Are you trading the Turkish lira or are you planning to do so? Then you should read carefully now. On May 22nd we wrote regarding Turkey: Why the pressure on Lira, stocks and bonds could soon increase enormously. It was about Turkey wanting to buy missiles in Russia. And that as a NATO member! The US sees this as an affront. Mr Erdogan prefers to buy missiles from Putin than from Trump. And according to US fears, the Russians would presumably get insights into NATO secrets (simplified).
Donald Trump shouldn’t like this. Not at all! Erdogan also said he wanted to call Trump before the G20 summit and explain his arguments for this purchase. Ohhhhh, but that sounds as if Erdogan has to justify himself to Trump? That’s a role he doesn’t like at all!
Turkish lira does not react yet
In the last few hours the Turkish Lira has fallen only minimally, which could be due to the fact that the currency market has to realize what is going on. USDTRY has “only” risen from 5.80 to 5.84 since tonight. But remember: Now there is very, very much possible that could work against the Turkish Lira. Donald Trump could threaten ragingly sanctions against Turkey (quite conceivable), or take other measures. Just think of the negative reaction of the lira when a few months ago it was “only” about the pastor imprisoned in Turkey.
And there is much more at stake here, namely military cooperation between Turkey and the USA and the overall structure of NATO. We do not know whether the Turkish lira is really going to drop either. Donald Trump usually starts tweeting around noon German time. Will he be commenting on the subject today? You should definitely keep an eye on USD vs Lira and Euro vs Lira!