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Turkish lira crisis: President Erdoğan announces boycott of US electrical goods – live updates | Turkish lira crisis: President Erdoğan announces boycott of US electrical goods – live updates |
(35 minutes later) | |
Turkey’s currency crisis won’t abate until the country’s central bank is allowed to raise interest rates, argues David Kohl, chief currency strategist at Swiss bank Julius Baer. | |
He writes: | |
The Turkish lira has depreciated dramatically over the last few days. However, it is not the overall macro backdrop of Turkey that is so disastrous as to justify the sharp drop of the currency. | |
Economic activity, including export dynamics and domestic demand, is actually growing at a solid pace. The sharp depreciation of the currency is driven by the fact that the Turkish economy is in constant overheating mode, with inflation above 15%. | |
The reluctance of the central bank to step in has been weighing on the lira. Increasing signs that President Erdogan has been expanding his powers into the central bank, preventing rate hikes and articulating an outright demonisation of high interest rates, has led to the panic selling of the currency. | |
Reuters have published more quotes from president Erdoğan’s speech in Ankara today. | Reuters have published more quotes from president Erdoğan’s speech in Ankara today. |
On the currency crisis, he called for Turkey to stay united: | On the currency crisis, he called for Turkey to stay united: |
“Together with our people, we will stand decisively against the dollar, forex prices, inflation and interest rates. We will protect our economic independence by being tight-knit together.” | “Together with our people, we will stand decisively against the dollar, forex prices, inflation and interest rates. We will protect our economic independence by being tight-knit together.” |
He threatened retaliatory action against America’s sanctions and tariffs: | He threatened retaliatory action against America’s sanctions and tariffs: |
“We will impose a boycott on U.S. electronic products. If they have iPhones, there is Samsung on the other side, and we have our own Vestel here.” | “We will impose a boycott on U.S. electronic products. If they have iPhones, there is Samsung on the other side, and we have our own Vestel here.” |
Erdoğan’s also urged businesses to keep investing, and not be put off by the market turmoil: | Erdoğan’s also urged businesses to keep investing, and not be put off by the market turmoil: |
“If we postpone our investments, if we convert our currency to foreign exchange because there’s danger, then we will have given into the enemy.” | “If we postpone our investments, if we convert our currency to foreign exchange because there’s danger, then we will have given into the enemy.” |
Shares in Turkish electronics firm Vestel have soared by almost 8%. | Shares in Turkish electronics firm Vestel have soared by almost 8%. |
It’s benefitting from president Erdoğan’s call for Turks to buy its Venus smartphone instead of Apple’s iPhone. | It’s benefitting from president Erdoğan’s call for Turks to buy its Venus smartphone instead of Apple’s iPhone. |
Erdoğan hasn’t always been so dismissive of iPhones. | Erdoğan hasn’t always been so dismissive of iPhones. |
Back in the attempted coup in 2016, the Turkish leader famously used Apple’s FaceTime service to mobilise his supporters. Erdoğan made a video call to a Turkish television network, urging the people to “convene at public squares and airports” to oppose the Turkish military forces who were trying to overthrow him. | Back in the attempted coup in 2016, the Turkish leader famously used Apple’s FaceTime service to mobilise his supporters. Erdoğan made a video call to a Turkish television network, urging the people to “convene at public squares and airports” to oppose the Turkish military forces who were trying to overthrow him. |
The appeal worked, and Erdoğan has been tightening his grip on the Turkish levers of power ever since. | The appeal worked, and Erdoğan has been tightening his grip on the Turkish levers of power ever since. |
By threatening to boycott American electronics, president Erdoğan is signalling that he won’t be cowed by the market turmoil. | By threatening to boycott American electronics, president Erdoğan is signalling that he won’t be cowed by the market turmoil. |
It’s an interesting threat. Turkey’s population is almost 80 million strong, meaning plenty of potential consumers. | It’s an interesting threat. Turkey’s population is almost 80 million strong, meaning plenty of potential consumers. |
But...given the slump in the lira, US goods such as iPhones are now much more expensive for Turkish consumers - so sales of pricy imports were already likely to fall. | But...given the slump in the lira, US goods such as iPhones are now much more expensive for Turkish consumers - so sales of pricy imports were already likely to fall. |
Investors may be concerned that Ankara isn’t trying to calm the crisis - instead, relations with the Trump administration could be getting worse. | Investors may be concerned that Ankara isn’t trying to calm the crisis - instead, relations with the Trump administration could be getting worse. |
As Neil Wilson of Markets.com puts it: | As Neil Wilson of Markets.com puts it: |
Erdogan fired a shot back at the US with a statement saying he would ban US electronic goods. I can’t imagine Apple is too worried about this, but it nevertheless points to a worrying deterioration in relations between Ankara and Washington. | Erdogan fired a shot back at the US with a statement saying he would ban US electronic goods. I can’t imagine Apple is too worried about this, but it nevertheless points to a worrying deterioration in relations between Ankara and Washington. |
Erdogan doubling down like this won’t help market sentiment. | Erdogan doubling down like this won’t help market sentiment. |
However, the lira is still holding onto its early gains as the currency stages a cautious recovery, after days of heavy losses. | However, the lira is still holding onto its early gains as the currency stages a cautious recovery, after days of heavy losses. |
Here’s Associated Press’s take on Erdoğan’s speech: | Here’s Associated Press’s take on Erdoğan’s speech: |
Turkish President Recep Tayyip Erdogan says his country will boycott U.S.-made electronic goods amid a diplomatic spat that has helped trigger a Turkish currency crisis. | Turkish President Recep Tayyip Erdogan says his country will boycott U.S.-made electronic goods amid a diplomatic spat that has helped trigger a Turkish currency crisis. |
Showing no signs of backing down in a standoff with the U.S., Erdogan suggested that Turkey would stop procuring U.S.-made iPhones and buy Korean Samsung or Turkish-made Vestel instead. | Showing no signs of backing down in a standoff with the U.S., Erdogan suggested that Turkey would stop procuring U.S.-made iPhones and buy Korean Samsung or Turkish-made Vestel instead. |
He said: “If they have the iPhone, there is Samsung elsewhere. We have Vestel.” | He said: “If they have the iPhone, there is Samsung elsewhere. We have Vestel.” |
It was unclear how Erdogan intended to enforce the boycott. | It was unclear how Erdogan intended to enforce the boycott. |
Erdogan also renewed a call for Turks to convert their dollars into the Turkish lira, to help strengthen the currency. | Erdogan also renewed a call for Turks to convert their dollars into the Turkish lira, to help strengthen the currency. |
The Turkish lira has nosedived in value in the past week over concerns about Erdogan’s economic policies and after the United States slapped sanctions on Turkey angered by the continued detention of an American pastor. | The Turkish lira has nosedived in value in the past week over concerns about Erdogan’s economic policies and after the United States slapped sanctions on Turkey angered by the continued detention of an American pastor. |
NEWSFLASH: Turkey’s president is giving another defiant speech, threatening to boycott American electrical goods in response to US sanctions. | NEWSFLASH: Turkey’s president is giving another defiant speech, threatening to boycott American electrical goods in response to US sanctions. |
President Recep Tayyip Erdoğan has told an audience in Ankara that the US was targeting Turkey. | President Recep Tayyip Erdoğan has told an audience in Ankara that the US was targeting Turkey. |
He warns: | He warns: |
We will boycott US electronic products. | We will boycott US electronic products. |
If they have iPhone, the other side has Samsung. In our country there is Venus, Vestel [the Turkish smartphone brand]. | If they have iPhone, the other side has Samsung. In our country there is Venus, Vestel [the Turkish smartphone brand]. |
Erdoğan also makes a direct threat towards the White House, warning that those who are waging “economic warfare” against Turkey will pay a price. | Erdoğan also makes a direct threat towards the White House, warning that those who are waging “economic warfare” against Turkey will pay a price. |
According to Bloomberg, he says: | According to Bloomberg, he says: |
There is a price we’re paying for the period we’re in. | There is a price we’re paying for the period we’re in. |
But there will be a price [which] those who’re waging an economic warfare against Turkey will also pay. | But there will be a price [which] those who’re waging an economic warfare against Turkey will also pay. |
Erdoğan is vowing to maintain a “firm political stance”, as his government takes the necessary measure to protect its economy. | Erdoğan is vowing to maintain a “firm political stance”, as his government takes the necessary measure to protect its economy. |
Erdoğan also argued that flip-flopping was not in the Turkish nation’s character, and that switching to foreign currencies would be “giving in to the enemy”. | Erdoğan also argued that flip-flopping was not in the Turkish nation’s character, and that switching to foreign currencies would be “giving in to the enemy”. |
He’s speaking at an event organised by Turkish think tank Seta (the Foundation for Political, Economic and Social Research). | He’s speaking at an event organised by Turkish think tank Seta (the Foundation for Political, Economic and Social Research). |
These charts show the divide in Britain’s labour market, with unemployment at a 43-year low, but wage growth decidedly underwhelming: | These charts show the divide in Britain’s labour market, with unemployment at a 43-year low, but wage growth decidedly underwhelming: |
Newsflash: Britain’s unemployment rate has hit a new 43-year low. | Newsflash: Britain’s unemployment rate has hit a new 43-year low. |
The UK’s jobless rate dropped to just 4.0% in April-June 2018, down from 4.2% previously. That’s the lowest level since the winter of 1975, when Harold Wilson was prime minister. | The UK’s jobless rate dropped to just 4.0% in April-June 2018, down from 4.2% previously. That’s the lowest level since the winter of 1975, when Harold Wilson was prime minister. |
In April to June 2018, the unemployment rate was 4.0% – it’s not been lower since December 1974 to February 1975 https://t.co/tQdXLhXhhx pic.twitter.com/ffPaFsAZId | In April to June 2018, the unemployment rate was 4.0% – it’s not been lower since December 1974 to February 1975 https://t.co/tQdXLhXhhx pic.twitter.com/ffPaFsAZId |
The Office for National Statistics reports that the number of people in work rose, while those out of work fell. | The Office for National Statistics reports that the number of people in work rose, while those out of work fell. |
However, the number of people dropping out of Britain’s labour force also rose, and more people became self-employed. | However, the number of people dropping out of Britain’s labour force also rose, and more people became self-employed. |
Here’s the details: | Here’s the details: |
The number of people in employment increased by 42,000 on the quarter to 32.39 million in the second quarter of 2018. | The number of people in employment increased by 42,000 on the quarter to 32.39 million in the second quarter of 2018. |
Unemployment declined by 65,000 on the quarter to 1.36 million. | Unemployment declined by 65,000 on the quarter to 1.36 million. |
The level of inactivity increased by 77,000 on the quarter, resulting in the inactivity rate increasing to 21.2%. | The level of inactivity increased by 77,000 on the quarter, resulting in the inactivity rate increasing to 21.2%. |
The number of self-employed people increased by 22,000 on the quarter to 4.77 million in the second quarter of 2018. | The number of self-employed people increased by 22,000 on the quarter to 4.77 million in the second quarter of 2018. |
However, people aren’t feeling the benefits in their pay packets. Total earnings (including bonuses) only rose by 2.4% per year during the quarter, down from 2.5%. | However, people aren’t feeling the benefits in their pay packets. Total earnings (including bonuses) only rose by 2.4% per year during the quarter, down from 2.5%. |
Germany has beaten expectations by growing by 0.5% in the second quarter of 2018. | Germany has beaten expectations by growing by 0.5% in the second quarter of 2018. |
The eurozone’s largest economy benefitted from stronger domestic demand from households and companies. | The eurozone’s largest economy benefitted from stronger domestic demand from households and companies. |
Statistics body Destatis also reports that German exports rose during the quarter, while imports increased at an “even stronger” pace. | Statistics body Destatis also reports that German exports rose during the quarter, while imports increased at an “even stronger” pace. |
Germany has outpaced the UK over the the last quarter (UK GDP rose by 0.4%), and was rather faster than France’s 0.2% expansion. | Germany has outpaced the UK over the the last quarter (UK GDP rose by 0.4%), and was rather faster than France’s 0.2% expansion. |
German growth in the first quarter of 2018 was also revised higher, from 0.3% to 0.4%. | German growth in the first quarter of 2018 was also revised higher, from 0.3% to 0.4%. |
Teis Knuthsen of Denmark’s Kirk Kapital points out that Germany has now been growing for four years in a row: | Teis Knuthsen of Denmark’s Kirk Kapital points out that Germany has now been growing for four years in a row: |
The German economy grew by 0.5% q/q in Q2, better than expected, and the 16th consecutive rise. Germany is on track for its longest expansion on record. pic.twitter.com/I7bIKeec0o | The German economy grew by 0.5% q/q in Q2, better than expected, and the 16th consecutive rise. Germany is on track for its longest expansion on record. pic.twitter.com/I7bIKeec0o |
However, economist Ulrik Bie thinks Germany could still falter in the months ahead, as Turkey’s crisis and the US-China trade wars bite. | However, economist Ulrik Bie thinks Germany could still falter in the months ahead, as Turkey’s crisis and the US-China trade wars bite. |
GDP grew by 0.5% in Q2 bringing down annual growth to 2.0%. With headwinds from trade, Italy, Turkey, higher inflation, and continued frugality in households, GDP-growth could disappoint in coming quarters #macrobond #germany pic.twitter.com/wg1DyWVVH1 | GDP grew by 0.5% in Q2 bringing down annual growth to 2.0%. With headwinds from trade, Italy, Turkey, higher inflation, and continued frugality in households, GDP-growth could disappoint in coming quarters #macrobond #germany pic.twitter.com/wg1DyWVVH1 |