- USD/TRY remains side-lined in the sub-8.70 area.
- Turkey’s inflation came in above consensus in June.
- Investors’ attention is now on the CBRT event next week.
The Turkish lira keeps the rangebound trade unchanged vs. the dollar and motivates USD/TRY to stabilize around the 8.70 region so far on Tuesday.
USD/TRY stays cautious ahead of CBRT
USD/TRY remains within a consolidative mood around 8.70 following the recent drop from new all-time highs in the 8.80 zone.
The pair, in the meantime, is likely to keep the cautious note unchanged, as the next meeting by the Turkish central bank (CBRT) gets closer (July 14).
Monday’s higher-than-forecast inflation figures in Turkey caught markets off-guard, pouring cold water over any probability of an interest rate cut at the CBRT event next week. Despite there is no guarantee of a rate cut later in the year, the perseverant high inflation is seen keeping that option out of favour, at least for the time being.
In fact, Turkey’s CPI rose 1.94% MoM in June and 17.53% from a year earlier, surpassing initial estimates and mitigating speculation that inflation could have peaked earlier in the year. Additional data saw Producer Prices rising 4.01% inter-month and 42.89% over the last twelve months.
What to look for around TRY
The outlook for the Turkish lira remains fragile despite the CBRT reiterated its commitment to fight the high inflation at its recent meetings. In the meantime, political effervescence within the ruling AK Party, the impact of the pandemic on the economic outlook, high unemployment and the so far utter absence of any intentions to implement the much-needed structural reforms remain poised to keep the lira under persistent pressure for the foreseeable future.
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 up 0.05% at 8.6681 and faces the next up barrier at 8.7974 (all-time high Jun.25) ahead of 9.0000 (round level). On the downside, a drop below 8.5953 (weekly low Jun.23) would aim 8.4971 (50-day SMA) and finally 8.2803 (monthly low Jun.11).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.