The lira slumps, the ruble struggles (Daily analysis 22.03.2021)

Important emerging market currencies are in the spotlight. The markets' positively perceived policy of boldly raising interest rates (from 17 to 19 percent last week) did not suit President Recep Erdoğan. The lira plunged by more than a dozen percent after a shocking weekend change in the central bank governor's position to someone more submissive and eager to pursue the interests of the ruling camp.

Turkish monetary policy independence is a mockery, which signals further problems for a currency whose value has halved in the last three years. Especially if the next steps involve withdrawal from the decisive tightening of the last six months' monetary policy. The ruble is also under pressure, losing 2.5 percent in a few days under the influence of the announcement that this week the administration of Joe Biden will announce new sanctions. The Russian currency was not even helped by the acceleration of the interest rate hike - the market expected the rates to rise in April, while the Bank of Russia raised them last Friday. In an unfavourable global environment, the troubles of the lira and dark clouds over the ruble are creating weight for the whole basket.

A week of economic barometers and numerous speeches

Throughout the week, the most important information from developed economies will be the economic barometers (PMI indexes), which will be released on Wednesday. Last week's meeting of the Federal Reserve did not calm down the sentiment on Treasury bond markets. Further attempts to control the debt sell-off can be expected after a series of policy makers' public speeches. The most important will be Fed Chief Jerome Powell and Treasury Secretary Janet Yellen's joint hearings before the Senate Banking Committee (Tuesday and Wednesday).

On the other hand, Thursday brings the quarterly meeting of the Swiss National Bank. It is worth noting the information published on Monday morning that in 2020 the Swiss National Bank spent as much as 110 billion francs on interventions aimed at weakening the currency. For comparison: a year earlier, it was a dozen or so billion francs. Recent increases in the EUR/CHF pair had to be received with joy, as they reduce the need for the presence of monetary authorities in the market. In this context, it is important to add that the SNB will maintain extremely soft rhetoric both due to its desire to sustain the much-needed weakness of the franc (the weakest of the currencies of the developed economies last month), as well as due to the greater than expected economic damage caused by the second wave of the pandemic. The franc should remain one of the weakest main currencies in a year of exiting the global economic slump dominated by market pondering over the nature of the rebound in inflation.