(04 OCTOBER 2018)DAILY MARKET BRIEF 2:Dollar up on strong economy By Peter Rosenstreich Strong economic data sent US yie

Inflation in Turkey blew out expectations, with the core reading up to 24.5% and producer prices hitting 46%. Oddly, TRY is stable, which must mean markets are confident the Central Bank of Turkey will fix it. So the CBT must hike. However, we have a hard time seeing the bank has freedom to hike enough. Food tabs rose 27.7%, energy inflation 27.03%: core inflation is likely to head higher. The CBT should raise at least 1.5% to keep real interest from going negative. But a 25.5% interest rate would be a killer - President Erdogan is unlikely to allow it. Give the macro environment, we look for the lira to weaken.

By Peter Rosenstreich