Weekly Market / 20-24 February 2023

While positive data from the USA affected gold positively, gram gold reached the highest levels in history. The movement in ounce gold prices began to change the balance in the markets. Ounce gold, which started to move towards 2000 dollars, also created momentum on the gram gold side. Along with the ounce of gold traded at the peak of 9 months, gram gold also climbed to 1165 lira. Ounce gold prices rose to 1929 dollars. The main reason for the strengthening of gold is the fact that inflation in the USA is on a downward trend and therefore the expectation that the Fed will slow down the pace of interest rate increases and reduce interest rates in 2023. The World Bank revised its economic growth forecasts downwards Last week, the World Bank revised its global growth forecast for 2023 from 3% to 1.7%. In its Global Economic Expectations report, the World Bank revised its growth expectations for the world economy for 2023 and 2024 downwards, announcing them at 1.7% and 2.7%, respectively. The organization cited high inflation, decreasing investments and tight monetary policy practices as the reasons for the revision. In the USA, CPI decreased by 0.1% on a monthly basis in December.

While consumer prices in the USA decreased by 0.1% on a monthly basis in December, the improvement in inflation supported the expectations that the Fed would reduce the pace of interest rate hikes. Consumer prices in the USA decreased by 0.1% on a monthly basis in December, for the first time since May 2020. While annual CPI inflation in the country fell to 6.5%, the lowest in more than a year, the decline in energy prices played an important role in this development. The view that the Fed will increase interest rates by 25 basis points at its meeting that will end on February 1 is gaining ground. The current account deficit reached 3.7 billion USD in November. According to the data announced by the CBRT, the current account deficit was 3.7 billion USD in November. While the foreign trade deficit continued to remain at high levels during this period, the 12-month cumulative current account deficit reached its highest level since August 2018 with 45 billion USD. The market‘s inflation expectations decreased.

According to the January results of the CBRT‘s Market Participants Survey, the market‘s inflation expectation for the next 12 months decreased from 34.9% to 30.4%. While market participants‘ growth and current account deficit expectations for the end of 2023 remained flat, the year-end USD/TL forecast was realized at 23.12. Last week, BIST-100 index decreased by 6.7%. Data showing that inflationary pressures have eased in the USA and statements made by Fed officials supported the global risk appetite. While a positive trend was observed in global stock markets, gold prices rose above the 1,900 USD level for the first time since May. The barrel price of Brent type crude oil completed last week at 85.3 USD with an increase of 8.5%. Domestically, the BIST-100 index recorded its fastest decline since December 2021, with 6.7% on a weekly basis. Bond interest rates and Turkey‘s 5-year CDS premium continued to increase.

CBRT‘s first interest rate decision of the year will be followed. The first Monetary Policy Committee meeting of the Central Bank of the Republic of Turkey (CBRT) of the year will be held on Thursday, January 19. To be remembered, it was announced that the CBRT completed the interest rate reduction cycle, which it started in August, with a 150 basis point interest rate cut at its November meeting, in order to maintain the momentum in industrial production and employment and the continuity of structural gains in supply and investment capacity in an environment where risks related to global growth increased and a loss of momentum in economic activity was observed. In parallel with this guidance, the CBRT, which did not make a change in interest rates in the December meeting, is not expected to make a change in interest rates in the January meeting.