Turkish financial markets have come under pressure this week amid concerns that a shift in the central bank’s reserve requirement policy heralds more aggressive monetary easing. These developments support our view that the lira has further to fall and that the central bank’s easing cycle will ultimately have to be reversed before long. Meanwhile, the hawkish tone of the minutes of the Polish central bank’s July meeting, as well as strong activity figures for July, suggest that the monetary easing markets are pricing in is unlikely to materialise.
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