FXStreet (Delhi) – Paul Fage, Senior Emerging Markets Strategist at TD Securities, suggests that yesterday‘s downing of the Russian warplane by the Turkish air force has made an already volatile geopolitical situation worse. Key Quotes “President Putin has threatened “serious consequences” for Turkey. However, retaliation is likely to fall short of imposing sanctions on trade with Turkey, and may be confined to Russia cutting some important joint projects.” “The incident calls into the question the idea that there is a significant rapprochement going on between the West and Russia. The West and Russia have very different interests in Syria, not to mention East Ukraine and the Crimea.” “Overall we think that the appointments to the new Turkish cabinet are slightly negative, with the exclusion of Babacan only partly offset by the prominent economic position given to Simsek.” “Yesterday’s CBRT decision was as expected with rates kept on hold. The press statement said little that was new, but, surprisingly, made no reference to a possible Fed hike.” “We continue to like short TRYBRL positions with a target of 1.10. Macro and geopolitical risks will remain high for Turkey, and Fed hikes are likely to magnify them. On the contrary, Brazil has corrected significantly more to reflect the ultra-bearish market view.” For more information, read our latest forex news.