• USD/TRY holds onto post-Fed advances, recently paring early Asian losses.
  • Turkish President Erdogan again criticized higher interest rates, plans alternative debt instruments for investors.
  • US T-bond yields, DXY cheer Fed’s hawkish halt with eyes US Q4 Advance GDP, Durable Goods Orders.
  • CBRT quarterly inflation report will be crucial as well.

USD/TRY picks up bids to $13.60, reversing the early Asian pullback on Thursday, as market players cheer the US Federal Reserve’s (Fed) hawkish play.

In doing so, the Turkish lira (TRY) currency pair ignores comments from President Recep Tayyip Erdogan who “Urges Turks to borrow after unorthodox rate cuts”, per Reuters.

During an interview with NTV, Turkish President Erdogan signaled further steps to relieve the burden of inflation while promising new alternative debt issuance for investors. The national leader reiterated his dislike for higher interest rates while saying, “High-interest rate environment creates a fragile situation.” Additionally, Erdogan also said, per Reuters, that loans will be used to increase production while also showing confidence in the new economic model that will ensure Turkey will be less impacted by speculative moves.

On the other hand, the US Federal Reserve (Fed) matched wide market expectations to keep benchmark interest rates and tapering targets intact during Wednesday’s Federal Open Market Committee (FOMC) meeting. However, the interesting part from the Monetary Policy Statement was, “The Committee expects it will soon be appropriate to raise the target range for the federal funds rate.”

Fed Chairman Jerome Powell also spoke in sync with the hawkish signals from the US central bank while saying, “There’s plenty of room to raise rates.” Though, his comments like, “The rate-hike path would depend on incoming data and noted that it is ‘impossible’ to predict,” were taken with a pinch of salt.

Amid these plays, US equities and commodities remained on the back foot, except for oil, whereas the US 10-year Treasury yields rose the most in three weeks, up eight basis points (bps) to 1.87% by the end of Wednesday’s North American session. That said, the US T-bond yields stay firmer around 1.85% while the S&P 500 Futures drop 0.65% by the press time.

Looking forward, comments from Turkey and geopolitical tension surrounding Russia and China may entertain USD/TRY traders. However, major attention will be given to the first readings of the US Q4 GDP and Durable Goods Orders for December. Additionally, the Turkish Central Bank's (CBRT) quarterly inflation report is also important to watch, up for publishing around 11:00 GMT on Thursday. Ahead of the release, Bloomberg said, "Turkey’s central bank is set to raise its inflation forecast Thursday after a collapse in the currency pushed consumer price growth to its highest in President Recep Tayyip Erdogan’s 19-year rule."

Technical analysis

Unless successfully crossing a five-week-old descending trend line, around $13.70 at the latest, USD/TRY remains lackluster. That said, the 21-DMA level of $13.51 and the mid-January lows near $13.15 could challenge the pair bears.

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