USD/TRY pushes further and prints new all-time peaks near 18.55

Extra depreciation in the lira sustains another uptick in USD/TRY to the area above 18.50 on Wednesday.

USD/TRY now looks to CPI

USD/TRY extends the march north on the back of the unabated rally in the greenback, which in turn appears well underpinned by investors’ repricing of the Fed’s tightening plans.

Nothing scheduled data wise in Türkiye on Wednesday should leave the attention to Thursday’s release of the Economic Sentiment Index for the month of September ahead of the key publication of inflation figures gauged by the CPI on Monday.

On the latter, finmin N.Nebati said earlier in the week that inflation pressures will start to ease towards year-end. His comments fell in line with those from President Erdogan made in previous days, who said prices would drop to “reasonable” levels by February 2023.

It is worth recalling that Ankara’s hopes of taming inflation are based on an economic programme that prioritizes low interest rates to support exports, production and investment, all aimed at restoring the current account surplus.

What to look for around TRY

USD/TRY keeps its move upwards well and sound, surpassing the key 18.50 level to clinch another all-time peak on Wednesday.

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 July and August), real interest rates remain entrenched well in negative territory and the political pressure to keep the CBRT biased towards low interest rates remains omnipresent.

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: Economic Confidence Index (Thursday) – Trade Balance (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 0.73% at 18.5119 and faces the next hurdle at 18.5375 (all-time high September 28) followed by 19.00 (round level). On the downside, a break below 18.0197 (55-day SMA) would expose 17.8590 (weekly low August 17) and finally 17.7586 (monthly low).