Turkey’s currency is being battered from all sides at the moment. In October 2017, the Lira fell sharply after both countries suspended bilateral visa processing in the latest US/Turkey diplomatic spat (although this was reversed in early November). Two weeks ago, it fell to a record low of 3.97 to the dollar, prompting the central bank to step in and cut borrowing limits for the banks. Last week we reported how the TRY was selling off on news flow from a trial in which a Turkish banker is accused by the US government of helping Iran to evade US sanctions via oil-for-gold deals. Turkey’s former economy minister, Zafer Caglayan, and two other banking executives have also been charged, albeit in absentia. In a document submitted to the court on 30 October 2017, federal prosecutors argued that evidence introduce at the trial will show that senior Turkish government officials and bankers “were integral to the sanctions evasion scheme”. There is a risk that the trial results in diplomatic penalties against Turkey and its banks and further sours US/Turkish relations.

Meanwhile, Turkey’s already high inflation rate continues to surprise on the upside. Last month, the consensus expectation for the October 2017 headline CPI was 11.5% – instead, the number came in at 11.9%. This month, the expectation for November 2017 was 12.5% and the headline CPI printed at 12.98%. This was the highest level since November 2003.

In terms of the breakdown, food and non-alcoholic beverages rose 15.78% from 12.74% in October, transportation 18.56% from 16.79% and housing and utilities 9.81% from 9.40%. On a positive note, inflation at hotels, cafes, and restaurants stabilized at 10.46% from 10.48%, which undoubtedly pleased many Turkish citizens. According to Fast FT, “the latest rise in Turkish inflation will seriously test the official aversion to big interest rate rises, with prices up by some 12.98 per cent on the year to November, according to the country’s stats office, up from a gain of 11.9 per cent in the previous month and a 14-year high. Comparisons with last year make for grim reading:”