USD/TRY clings to the consolidative mood below 18.60

The Turkish lira depreciates modestly vs. the greenback, with USD/TRY navigating the usual consolidative range just below the 18.6000 mark on Monday.

USD/TRY focused on the CBRT

No changes to the side-lined pattern around the pair, which remains well capped by the 18.60 region for the time being.

The next key event in the Turkish calendar will be the interest rate decision by the Turkish central bank (CBRT) on October 20. Consensus, in the meantime, seems to have already priced in another rate cut (100 bps likely), particularly following latest comments from President Erdogan, who suggested that the One-Week Repo Rate should be around single digits by year end (from current 12.00%).

Earlier on Monday, the Turkish Treasury announced a TL38.63B deficit in the Budget Balance in September.

What to look for around TRY

USD/TRY keeps navigating the area of all-time highs near 18.60 amidst the combination of omnipresent lira weakness and bouts of strength in the dollar.

So far, price action around the Turkish lira is expected to keep gyrating around the performance of energy and commodity prices - which are directly correlated to developments from the war in Ukraine - the broad risk appetite trends and the Fed’s rate path in the next months.

Extra risks facing the Turkish currency also come from the domestic backyard, as inflation gives no signs of abating (despite rising less than forecast in the last three months), real interest rates remain entrenched well in negative territory and the omnipresent political pressure to keep the CBRT biased towards a low-interest-rates policy.

In addition, the lira is poised to keep suffering against the backdrop of Ankara’s plans to prioritize growth and shift the current account deficit into surplus following a lower-interest-rate recipe.

Key events in Türkiye this week: Budget Balance (Monday) – CBRT Interest Rate Decision (Thursday) – Consumer Confidence (Friday).

Eminent issues on the back boiler: FX intervention by the CBRT. Progress of the government’s scheme oriented to support the lira via protected time deposits. Constant government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Structural reforms. Presidential/Parliamentary elections in June 23.

USD/TRY key levels

So far, the pair is gaining 0.28% at 18.5760 and faces the next hurdle at 18.5980 (all-time high October 11) followed by 19.00 (round level). On the downside, a break below 18.2200 (55-day SMA) would expose 17.8590 (weekly low August 17) and finally 17.7586 (monthly low).