USD/TRY advances further to the 8.70 region

  • USD/TRY adds to recent gains near 8.7000.
  • Turkey’s CPI rose at an annualized 16.59% in May.
  • US ADP report rose to 978K jobs during last month.

The Turkish lira extends the weekly downside and pushes USD/TRY to the vicinity of the 8.70 region on Thursday.

USD/TRY higher on dollar gains

USD/TRY advances for the third consecutive session on Thursday and keeps the upside pressure unabated after Wednesday’s new all-time highs near 8.7500.

The upside momentum in the pair comes in response to the almost omnipresent offered stance in the Turkish currency coupled with the gain of extra momentum by the dollar in past sessions.

Earlier in the session, key inflation figures in Turkey showed the CPI rose 16.59% on a year to May and 0.89% from a month earlier, both prints coming in short of previous estimates. Additionally, Producer Prices rose 3.92% MoM and 38.33% YoY.

What to look for around TRY

The outlook for the Turkish lira has deteriorated further after new all-time lows vs. the dollar recorded earlier in the week. Extra weakness in the currency has been exacerbated as of late after President Erdogan fired another CBRT deputy governor, all amidst a wider move including the replacement of several directors at the central bank. These decisions have undermined further the already fragile credibility surrounding the CBR. Looking at the broader picture, the political scenario continues to show cracks within the ruling AK Party, while the pandemic keeps taking a toll on the economic outlook.

Eminent issues on the back boiler: Potential US/EU sanctions against Ankara. Government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Much-needed structural reforms. Growth outlook vs. progress of the coronavirus pandemic. Capital controls? The IMF could step in to bring in financial assistance.

USD/TRY key levels

So far, the pair is advancing 1.39% at 8.7022 and faces the next up barrier at 8.7401 (all-time high Jun.2) ahead of 9.0000 (round level). On the other hand, a drop below 8.2982 (weekly low May 17) would aim for 8.2781 (50-day SMA) and then 8.1316 (weekly low Apr.29).

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