All eyes in the country turned to the interest rate decision of the Central Bank


Lerato Khumalo

While a mixed trend was observed in global markets ahead of today’s growth data to be announced in the US, domestic eyes turned to the monetary policy decisions of the Central Bank of the Republic of Turkey (CBRT).

While clues continue to be sought about the steps the US Federal Reserve (Fed) will take in the coming period, the Gross Domestic Product (GDP) to be announced in the country today is expected to give a signal about the state of economic activity.

Analysts recalled that Fed officials continued to give “cautious” guidance throughout the week, and said that personal consumption expenditures data, which the Fed takes into account as an inflation indicator and will be announced tomorrow after the growth data, will also be in investors’ focus.

In the second estimates of the January-March period GDP data published by the US Department of Commerce last month, it was predicted that the country’s economy would grow by 1.3 percent in the first quarter.

Before the growth data in the USA, the probability of the Fed to cut interest rates in September is priced at 68 percent in money markets and 97 percent in November. Following a possible interest rate cut, the possibility of the bank reducing interest rates for the second time at the December meeting maintains its place in pricing at 73 percent.

According to data released yesterday in the USA, the average interest rate for a 30-year mortgage (housing loan) decreased to 6.93 percent, while mortgage applications continued to increase by 0.8 percent.

New home sales in the country decreased by 11.3 percent on a monthly basis in May, due to the impact of high housing prices and mortgage (housing loan) interest rates, recording the lowest level since November 2023.

Separately, yesterday the Fed reported that the banks it stress tested were well positioned to weather a serious recession.

On the other hand, after the German automaker Volkswagen Group announced that it planned to invest $5 billion in the US electric vehicle manufacturer Rivian, Rivian’s share price closed the day with a 23 percent increase in value yesterday.

Following the news that German Bosch was considering buying US white goods manufacturer Whirlpool, Whirlpool’s shares rose 17 percent, while US technology giant Amazon’s market value exceeded $2 trillion for the first time. The company’s shares closed the day with a nearly 4 percent increase.

With these developments, the US 10-year bond yield increased by approximately 7 basis points, closing the day at 4.32 percent, and is currently at 4.34 percent.

The dollar index, which closed the day at 106.1 yesterday with a 0.3 percent increase and recorded the highest daily close of the last 2 months, is today trading at 105.9, 0.1 percent below its previous close.

While the ounce price of gold closed the day at 2 thousand 298 dollars yesterday with a 0.9 percent loss in value, it is currently trading at 2 thousand 300 dollars with a 0.1 percent increase compared to its previous closing.

While the barrel price of Brent oil increased by 0.3 percent to 84.4 dollars yesterday, it is following a horizontal course today.

On the other hand, analysts stated that the technology rally seen in global stock markets this year played a leading role in the rise of stock markets, and also expressed that concerns continue that the rise in the sector is nearing its end.

Yesterday in the New York Stock Exchange, the Nasdaq index increased by 0.49 percent, the S&P 500 index increased by 0.16 percent and the Dow Jones index increased by 0.04 percent. Index futures contracts in the USA started the new day with a mixed course.

While the negative trend prevailed in European stock markets yesterday, consumer and economic confidence index data will be followed in the region today.

Analysts expressed that concerns about the possible success of the far right continue in the early general elections to be held in France on June 30.

While signals are being sought from the verbal guidance of European Central Bank (ECB) members regarding the rate of interest rate reduction of the bank, ECB Member Martins Kazakhstan, who made a statement yesterday, said that there is no need to rush in loosening monetary policy.

ECB Chief Economist Philip Lane also stated that real private consumption continues to lag behind the predictions made before the epidemic and said, “If inflation eases, more interest rate cuts will come.”

On the other hand, yesterday, German automobile manufacturer Volkswagen’s shares fell by 1.64 percent after it announced a $5 billion investment in the US-based electric vehicle startup Rivian.

Shares of aircraft manufacturer Airbus fell nearly 3 percent yesterday, after losing nearly 10 percent the day before as the company lowered its aircraft deliveries and earnings targets for this year.

Yesterday, the FTSE 100 index in England decreased by 0.27 percent, the CAC 40 index in France decreased by 0.69 percent, the DAX 40 index in Germany decreased by 0.12 percent and the MIB 30 index in Italy decreased by 0.49 percent. Index futures contracts in Europe started the new day with a mixed course.

While the negative trend was also prominent in Asian stock markets, the Japanese yen rose after falling to its lowest level against the dollar since 1986.

Following the depreciation of the Japanese yen, Japanese Finance Minister Shunichi Suzuki said in a statement that the necessary steps would be taken to defend the currency as it was cautious against sudden and unilateral moves.

The dollar/yen parity increased by 0.7 percent yesterday to 160.9, testing its highest level in the last 38 years, and is trading at 160.5 today, 0.2 percent below its previous close.

On the other hand, according to data released today in Japan, retail sales exceeded expectations with a 3 percent increase on an annual basis in May.

Near the close, the Nikkei 225 index in Japan decreased by 1 percent, the Kospi index in South Korea decreased by 0.4 percent, the Hang Seng index in Hong Kong decreased by 2.2 percent and the Shanghai composite index in China decreased by 0.7 percent.

Domestically, the BIST 100 index in Borsa Istanbul, which followed a selling trend yesterday, closed the day at 10,486.70 points with a decrease of 1.81 percent compared to the previous close, while today all eyes turned to the interest rate decision of the Central Bank of the Republic of Turkey (CBRT).

All economists participating in AA Finance’s expectations survey expect the CBRT to keep the policy rate constant at 50 percent at the Monetary Policy Committee (MPC) meeting.

Dollar/TL is traded at 32.8330 at the opening of the interbank market today, after following a seller’s course yesterday and completing the day at 32.8429, 0.3 percent below its previous closing.

On the other hand, according to the data announced yesterday, the CBRT’s total reserves increased by 149 million dollars in the week of June 14 compared to the previous week, reaching an all-time high of 146 billion 301 million dollars.

While people residing abroad also purchased $791.7 million worth of Government Domestic Debt Securities (DIBS) during the period in question, the total purchases of foreigners who made purchases for 12 consecutive weeks for the first time in history approached $9 billion during this period.

Analysts stated that today, in addition to the CBRT’s interest rate decision, the economic confidence index and weekly money and bank statistics will be followed in the country, and abroad, the intense data agenda, especially the US growth data, will be followed, and from a technical perspective, the 10,400 and 10,300 levels in the BIST 100 index will be supported. He noted that 10,600 and 10,700 points are in resistance position.