USD/TRY: Mildly bid around 5.73 as Turkey’s President Erdogan pledges to lower interest rates

Turkey’s President Recep Tayyip Erdogan pledged interest rate cuts to achieve the inflation target.
The US-Turkey relations remain strained ever since the nation agreed to import Russian missiles.
The US might levy fresh sanctions on Turkey after it has started delivery of the much-debated Russian aircraft despite the US warnings.

Anil Panchal FXStreet

While speculations of rate cuts and strained relations with the US continue to weigh on the Turkish Lira (TRY), the US Dollar (USD) has its own limitations to hide. As a result, the USD/TRY pair remains mildly bid around 5.7260 at the start of Monday’s Asian trading.

Firing the central bank governor before few days wasn’t only a fake threat given by the Turkish President Recep Tayyip Erdogan as he Bloomberg reports that the President recently pledged to lower the interest rate in order to cut the inflation to a single digit.

Not only expectations of the rate cut, but the nation’s bond with the US can also be considered as a negative point for the Turkish currency. The US has repeatedly warned Turkey not to import Russian missiles as it threatens their Lockheed Martin’s F-35 next-generation stealth fighter jet program. However, the other side went on and imported the Russian aircraft citing economic reasons.

At the G20, the US President Donald Trump showed readiness to go ahead with sanctions if Turkey imports the Russian missiles, which it started afterward. With this, the Financial Times (FT) reports that some of Trump administration lawmakers are preparing the list of sanctions that can be levied on Turkey. Fearing the same, Mr. Erdogan urges Mr. Trump to avoid sanctions, as per the FT, and find some middle ground to talk.

It should also be noted that the global rating institute Fitch recently downgraded Turkey's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'BB-' from 'BB' with a Negative Outlook.

On the other hand, the US-China trade tussle and doubts over the Fed’s future monetary policy continue to weigh on the greenback.

While the absence of Turkish players from the market, due to Democracy and National Solidarity Day, limit the pair’s reaction to the news, investors might propel the quote on the bearish expectations from the Turkish central bank and US-Turkey relations as soon as the trading gets active.

Technical Analysis

The 5.7325/40 confluence region comprising 100-day and 21-day exponential moving average (EMA) limits the pair’s immediate upside towards the current month high of 5.7884 while July 01 low near 5.62 and the monthly bottom around 5.5800 could please bears during the downpour.

Author

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

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