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Turkish President Erdogan fired Central Bank Governor Murat Çetinkaya, who was supposed to remain in this position until 2020,  in a surprise decision on Saturday. Commenting on the decision,  “We told him repeatedly in economy meetings that he should cut rates. We told him that the rate cut would help inflation to fall. He didn’t do what was necessary,” Erdogan said, according to Reuters.

Markets are now waiting to see how the USD/TRY pair will react to these developments. “We expect a very weak opening of the lira on Monday. USDTRY can possibly move 2-3% higher, while the front-end of the curve inverts in conditions of thin liquidity. Spillover into generalized risk aversion is a concrete possibility,” TD Securities analysts noted.

The pair erased 2.75% last week and posted its lowest weekly close since early April at 5.6228.