Turkey’s economic confidence index rose to 98.9 in May from 97.2 in the prior month, pointing to firmer sentiment across the economy. The move keeps the gauge below the 100 threshold that separates optimism from pessimism.
The May reading represents an increase of 1.7 points on the month. The index aggregates assessments from households and businesses across multiple sectors to provide a snapshot of confidence conditions.
Improving Sentiment and Decreased Risk
The rise in Turkey’s economic confidence index from 97.2 to 98.9 in May is a bullish signal we are monitoring closely. This indicates improving sentiment among consumers and businesses, which often precedes stronger economic data. We see this as a potential catalyst for Turkish assets heading into July 2026.
This optimism is supported by the central bank’s commitment to orthodox policy, holding its key interest rate at 50% through its June meeting. The market has rewarded this consistency, with Turkey’s 5-year credit default swaps (CDS) falling to around 260 basis points, down from over 300 earlier in the year. This shows a marked decrease in perceived risk by international investors.
Opportunities in Equities and Currency Markets
Given this backdrop, we believe derivative traders should consider bullish positions on the BIST 100 stock index. Buying call options with August 2026 expiration dates could be an effective way to capitalize on further upside momentum. This strategy offers exposure to a potential rally while clearly defining the maximum risk involved.
For the currency markets, the Turkish Lira has shown increased stability, which we expect to continue in the coming weeks. The recent slowdown in monthly inflation, with the annual rate now at 65%, supports a less volatile USD/TRY exchange rate. Selling covered calls against a long Lira position or using option spreads could be a prudent strategy to generate yield from this stability.
