Euro Wobbles As Investors Fret Bank Exposure To Turkey

TALKING POINTS - EURO, EUROZONE BANKS, TURKEY, LIRA

• The Euro was pressured against a generally stronger US Dollar
• Turkey’s woes may well have been responsible
• There are mounting concerns about European bank exposure to the troubled country

The Euro wilted quite sharply as Asian trade faded out on Friday, with worries about Turkey widely reported to be behind the move.

The Turkish Lira was hammered this week.USD/TRY has soared and the Lira has lost about 30% of its value against the greenback this year alone. Now it seems that possible contagion to European banks exposed to Turkey is an additional worry for investors.

The Financial Times has reported that the Eurozone’s financial watchdog - the Single Supervisory Mechanism - is concerned about the exposure of major lenders such as Unicredit, BBVA and BNP Paribas to Turkish business.

EUR/USD duly slipped below the 1.1500 handle, getting as low as 1.1432 before stabilizing back above 1.1450.

The move came against the backdrop of a generally stronger US Dollar and Japanese Yenas trade-war fears saw investors pile back into perceived haven assets. Now Turkey seems to be giving them a reason to double down on this trade.

With memories of the Eurozone’s own banking crisis still raw, it seems likely that Turkish headlines will weigh on the Euro for some considerable time to come.

Friday will bring some more risk events on this subject. President Erdogan is due to speak at 1100GMT, and again at 1330, with Finance Minister Berat Albyrak crossing the wires with a new economic programme at 1130.

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