Elsewhere, the Euro edged off a six month low against the US Dollar this morning following the release of last night’s FOMC minutes. The Fed continued to suggest that a gradual pace of interest rate hikes remained on track, although struck somewhat of a dovish tone by stating that they would be willing to let US inflation rise slightly above the central bank’s 2% target for a ‘temporary period’. This is a slight blow to those hoping for a total of four interest rate hikes in the US, this year, and suggests that much of the committee are in no rush to support a faster pace of hikes than indicated in the March projections.

During the London session yesterday, the Euro was firmly on the back foot after another disappointing set of PMI data compounded concerns that the Eurozone economy could be set to slow in the second quarter. The composite index from Markit, which represents a weighted measure of activity in the services and manufacturing sectors, slumped to 54.1 for this month. While still comfortable in expansion territory, this marked a sharp slowdown from the 55.1 recorded a month prior, while registering its lowest level in eighteen months.

Turkish Lira recovers after CBRT surprises with massive rate hike

Away from the major currencies, the Turkish Lira undoubtedly had one of the most extraordinary trading days on Wednesday.

The currency was sent crashing to a fresh record low, down another 3% for the day, on escalating concerns regarding relations with the US and the central bank’s monetary policy. However, in a highly unexpected move, the Central Bank of Turkey (CBRT) announced late yesterday evening that it would be raising its main Late Liquidity Window interest rate by a sizable 300 basis points to 16.5%, despite repeated calls from President Erdogan for lower rates over the past few weeks. The bank also hinted that further policy tightening could be on the way, and would be delivered ‘if needed’ as policymakers attempt to rein in inflation and protect the ailing currency.

Yesterday’s drastic move by the CBRT caused a sharp correction in the Lira, which appreciated by a massive 6.5% against the US Dollar in less than an hour. In a good indication of just how volatile the Lira has been in the past few sessions, this was only enough to return the currency back to where it was at the start of Tuesday trading and it currently sits at more than 15% lower since the beginning of the month.