Firmly Into the New Year

Slight Improvement for CEE Currencies and Rouble

Hardly a stone was left unturned at the end of the year and the beginning of the year also brought many new developments that could also bring improvements for Turkey.

Towards the end of the year, there was a global flight of capital to the USA, which also left its mark on the stock markets. Emerging markets suffered heavily, as did Switzerland and commodity stocks in specific sectors. The USA and Germany, on the other hand, benefited disproportionately.

For the coming months, I assume that the current recovery of currencies against the USD will come to an end. With increasing clarity regarding tax policy in the US and the course of the war in Ukraine, the USD may also strengthen further.

It is currently difficult to predict what Trump’s actual policy will look like and what effect it will have. However, given his aversion to the trade deficit, I assume that this will lead to a USD devaluation policy, which would also benefit the currencies in Eastern Europe.

CEE, RUB and Euro Would Benefit if Ukraine War Ends

If Trump really is striving for an end to the war in Ukraine, this will only work if Ukraine loses territory, which may provide the basis for future disputes.

On the other hand, both Russia and Ukraine are war-weary and / or wounded. I reckon that, in the end, an end with horror (for Ukraine) would be better than horror without end.

Europe and the euro are suffering from the war ‘in Europe’. If this war ends, one of Trump’s secondary goals of weakening the USD would already be (partially) achieved. I assume that an end to the war would drive the euro to 1.15 EUR/USD quite quickly.

Russia would also benefit from this and will probably agree to a deal if it at least has the prospect of being able to access its foreign exchange reserves again without obstacles and return to the markets.

In recent years, Russia has moved too close to China in geostrategic terms and has an almost inexhaustible reservoir of raw materials – including critical ones – that Western countries urgently need. A deal would be in the interests of both sides and could be done without ‘problems on the back of Ukraine’.

Both Trump as an angel of peace and Putin as the liberator of Russia’s eastern Ukraine could present themselves as angels of peace in their own country, and Trump could even be celebrated worldwide for this.

The End of Assad in Syria Improves Turkey’s Prospects

The regime change in Syria with Turkey’s help is a clear relief for Turkey (and Europe). Not only is there a chance that millions of Syrian refugees will return, but also that Turkey will be able to expand its zone of influence and economic influence. The depreciation of the lira has slowed in the last year and inflation is also slowly but surely falling as a result. If this continues in the current setting and the current rapprochement with the EU (which the EU needs more than Turkey) is successful, nothing stands in the way of an end to the devaluation of the TRY. This could start in the second half of the year and become quite significant, especially against the USD.

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