Euro Gaps Lower After Lira Tumbles and Dollar Rallies, Eyes GDP

Blanche Robertson
August 13, 2018

"It is a national fight", Erdogan said.

The United States is the world's biggest steel importer.

U.S. President Donald Trump on Friday ramped up his attack on Turkey by doubling U.S. tariffs on Turkish aluminum and steel imports to 20 percent and 50 percent, respectively.

In a statement the White House clarified that Trump had authorized the preparation of documents to raise steel and aluminum tariffs.

Trump intensified the alarm on financial markets with a new tweet on the Turkey row.

President Trump's discarding of the Iran nuclear deal is a point of contention, as well, as almost half of Turkey's oil imports come from Iran, meaning new sanctions against Iran come back and hurt the Turkish economy as well.

The US imposed tariffs of 25 per cent on steel and 10 per cent on aluminum in March for imports from a variety of countries.

Although he downplayed the Dollar's strength, he once again summoned God to be on the Turkish side against the US.

Relations between the two North Atlantic Treaty Organisation allies have sunk to their lowest point in decades over a number of issues including the detention of U.S. pastor Andrew Brunson on terror-related charges, prompting the Turkish lira to hit record lows against the dollar. The weakened currency's value has helped increase inflation and anxious worldwide investors.

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The lira crashed days ago as tensions between the USA and Turkey began to rise. The European Central Bank announced on Friday that it was concerned about the Lira's exposure to European banks, fearing that financial contagion may spread to major lenders such as Unicredit, BBVA, and BNP Paribas. European banking stocks fell on Friday and the nervousness spread to the U.S., where the S&P500 finished lost 0.7%.

Much of the early action was in currencies with the euro gapping lower as the Turkish lira (TRYTOM=D3) took another slide to all-time lows around 7.2400.

President Tayyip Erdogan denied on Saturday that Turkey is in a currency crisis, dismissing a plunge in the lira as "fluctuations" which have nothing to do with economic fundamentals.

"We can only say "good-bye" to anyone who sacrifices its strategic partnership and a half century alliance with a country of 81 million for the sake of relations with terror groups", Erdogan said. "This will be the response to those who have declared an economic war".

Turkey and the United States squabbled last week over Turkey's failure to free a US pastor named Andrew Brunson from house arrest while he awaits his trial on terrorism charges. For one, the 2016 detention of an American evangelical pastor named Andrew Brunson, has aggravated tensions.

His cause resonates with Mr Trump's Christian conservative supporters.

Turkish officials held talks in Washington this week, but there was no breakthrough.

Although Mr Erdogan struck a defiant tone, his foreign ministry called for diplomacy and dialogue to solve problems with the US.

Iran has also suffered a major tumbling of its currency this year partly over the reimposition of U.S. sanctions after Trump abandoned the 2015 nuclear deal.

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