USD/TRY recedes from 2022 highs around 15.00

Following new 2022 peaks around 15.00, USD/TRY lost some upside impetus and retreated to the current 14.70 region at the end of the week.

USD/TRY looks to geopolitics, CBRT

USD/TRY now trades on the defensive for the first time after nine consecutive daily gains, coming under selling pressure following new YTD highs on the back of alternating risk appetite trends as well as persistent uncertainty in the geopolitical landscape.

The depreciation of the Turkish lira has been accelerating in past days pari passu with the rising geopolitical concerns stemming from Ukraine, which at the same time morphed into an acute increase in crude oil prices and commodities in general, all impacting on the economic outlook for Turkey.

In the meantime, the pair is expected to remain under scrutiny in light of the upcoming Turkish central bank (CBRT) meeting, where consensus remains tilted towards a steady hand when it comes to any move on the policy rate.

In the docket, January data saw Turkey’s Retail Sales contract at a monthly 1.5% and expand 7.9% vs. the same month of 2021. In addition, Industrial Production expanded 7.6% over the last twelve months, the Current Account deficit shrank to $7.11B and the End Year CPI Forecast rose to 40.47% in March.

What to look for around TRY

Further upside momentum pushed the pair to clinch YTD highs around 15.00. The Turkish lira is predicted to remain under the microscope amidst rampant inflation, negative real interest rates, the omnipresent political pressure to keep the CBRT biased towards low interest rates and fresh concerns stemming from the geopolitical scenario.

Key events in Turkey this week: Current Account, End Year CPI Forecast, Industrial Production (Friday).

Eminent issues on the back boiler: Progress (or lack of it) of the government’s new 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. Much-needed structural reforms. Earlier Presidential/Parliamentary elections?

USD/TRY key levels

So far, the pair is retreating 0.69% at 14.7146 and a drop below 13.7143 (low Feb.25) would expose 13.5091 (low Feb.18) and finally 12.4317 (low Feb.11). On the other hand, the next up barrier lines up at 14.9889 (2022 high Mar.11) seconded by 18.2582 (all-time high Dec.20) and then 19.00 (round level).