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Markets Eye October Inflation Data: Can Borsa Istanbul Sustain Its Gains?

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Summary:


After a calm week, Turkish markets are focused on October inflation figures to be released tomorrow. Following a strong rally, Borsa Istanbul entered a technical correction but found solid support around key levels. The Turkish lira weakened slightly against the dollar, while bond yields continued to fall. Economists expect monthly CPI to rise around 2.7%, slightly below September’s 3.23%. A softer reading could reinforce expectations for continued rate cuts by the Central Bank, while a higher print may challenge that view.

Inflation in Focus: 2.7% Forecast Seen as a Key Threshold

September inflation came in stronger than expected, yet the Central Bank of Turkey (CBRT) proceeded with another 100-basis-point rate cut—though signaling a slower pace. Markets now see October as a crucial data point for the policy outlook.

  • Consensus forecast: Monthly CPI around 2.7%

  • Upside risk: Above 3% could weaken the case for another rate cut

  • Positive scenario: Around or below 2% would be seen as disinflationary progress

If inflation surprises to the upside, expectations for further monetary easing could fade—potentially triggering market volatility. A benign figure, on the other hand, may encourage renewed buying in equities and bonds.

Inflation and Policy Balance: A Delicate Equation

Turkey remains among the top five countries globally with the highest inflation, keeping policy rates elevated. While the CBRT has largely completed its part on the monetary side, analysts note that fiscal discipline remains essential to achieve lasting price stability.

High interest rates have:

  • Strengthened the Turkish lira and rebuilt FX reserves

  • Helped contain inflation through demand suppression

  • Yet placed pressure on domestic growth

A sustainable rate-cut cycle will depend on clear progress in lowering inflation. Markets still remember the costly consequences of premature easing in past cycles.

Borsa Istanbul: Support Levels Hold After a Sharp Rally

After a steep rally, Borsa Istanbul experienced a technical pullback, finding buyers at support zones.

  • Support: 10,800 – 10,680 – 10,500

  • Resistance: 11,150 – 11,300 – 11,540–11,600 range

Analysts describe sentiment as “cautiously optimistic”, with buyers defending key levels but resistance proving difficult to break. As long as the benchmark index remains above 10,800, upside attempts could continue.

Corporate Earnings: Banks Lead, Industrials Lag

Third-quarter earnings reports showed mixed results:

  • Banks: Average profit growth around 40% year-on-year, outpacing inflation

  • Industrials: Many posted lower profits or losses due to inflation accounting adjustments

This divergence has made bank shares the main driver of the Borsa’s recent strength. However, analysts note that industrial valuations remain elevated, and company-level results have so far failed to spark major price action.

Gold: Buyers Return, but Momentum Is Weak

Gold prices rebounded after profit-taking last week.

  • Geopolitics: Israel–Gaza tensions triggered brief safe-haven demand

  • Macro backdrop: Fed Chair Jerome Powell’s hawkish remarks strengthened the dollar and lifted U.S. bond yields

While short-term momentum has faded, medium- to long-term fundamentals remain supportive.

  • Gold ounce: Rebounded above $4,000 after testing the $3,900 level

  • Key resistance: $4,100–$4,150 zone

  • Gram gold: Found buyers near TRY 5,250, eyeing resistance at TRY 5,600
    Silver mirrored gold’s path, with sustained momentum above $49.50–$50.00 seen as bullish.

Market Outlook: Inflation to Set the Tone

Tomorrow’s CPI release will determine the near-term direction of Turkish assets.

  • Low reading: Would strengthen the case for continued CBRT rate cuts and likely boost equities

  • High reading: Could halt easing expectations, pushing bond yields and the dollar higher

For now, traders maintain a wait-and-see stance, balancing optimism over disinflation against caution about global interest rate risks.

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