USD/TRY: No changes to the side-lined trading near 18.6000

The Turkish lira starts the week on the defensive and lifts USD/TRY back to the 18.5800 region on Monday.

USD/TRY focuses on geopolitics, USD

USD/TRY quickly leaves behind Friday’s retracement on the back of the continuation of the bid bias in the dollar, while renewed Russian shelling on several highly populated Ukrainian cities have been also sustaining extra inflows into the safe haven universe.

In the meantime, the selling pressure in the Turkish lira is not expected to abandon the currency for the foreseeable future, not after President Erdogan comments over the weekend reiterating that the One-Week Repo Rate will be in single digits by year-end.

The Turkish central bank (CBRT) meets again on October 20 and is therefore expected to keep lowering the interest rate (currently at 12.00%).

In the domestic calendar, the Unemployment Rate in Türkiye receded to 9.6% in August (from 10.0%).

What to look for around TRY

USD/TRY keeps navigating the area of all-time tops near 18.60 amidst the combination of omnipresent lira weakness and the renewed bid bias 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 (via higher exports and tourism revenue) and the improvement in the current account.

Key events in Türkiye this week: Unemployment Rate (Monday) – Current Account (Tuesday) – Industrial Production, Retail Sales (Wednesday) – End Year CPI Forecast (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 0.21% at 18.5778 and faces the next hurdle at 18.5908 (all-time high October 4) followed by 19.00 (round level). On the downside, a break below 18.1591 (55-day SMA) would expose 17.8590 (weekly low August 17) and finally 17.7586 (monthly low).