USD/TRY refreshes record high around 8.8000 as Turkish PM Erdogan pushes for rate cut

  • USD/TRY extends Tuesday’s recovery moves, rallies over 1,400 bps on PM Erdogan’s comments.
  • Turkey’s PM Erdogan pushes for interest rate cuts during talks with central bank governor.
  • US dollar recovers early Tuesday losses amid mixed clues, data.
  • Turkish Exports for April, chatters over inflation and central bank action in focus.

USD/TRY jumps to fresh record top of 8.8049 within a few minutes of Turkish Prime Minister Recep Tayyip Erdogan’s speech during early Wednesday morning in Asia, late Tuesday for the rest.

In his latest moves, Turkey’s PM Erdogan talked to central bank Governor Sahap Kavcioglu and said that they must lower interest rates. His push has never been taken lightly as the history suggests firing of key diplomats and central bankers for not following his advice.

Read: Turkey's PM Erdogan: Must lower interest rates

Markets understand the same and propel USD/TRY by over 2,000 basis points (bps), still rallying, amid hopes of further easing by the Turkish central bank (CBRT).

It’s worth mentioning that the US dollar recovery during late Tuesday, backed by easing Treasury yields and mixed data. Although the US ISM Manufacturing PMI crossed the 60.7 forecast and prior with 61.2, details suggest no major change in key components relating to the inflation and employment catalysts. It’s worth noting that the US Treasury yields began the week on the front foot before closing with 1.3 bps of daily gains to 1.60% as trades cheered Friday’s strong Core PCE Price Index data.

Amid these plays, the US dollar index (DXY) closed on the positive side by the end of the North American session on Tuesday while Wall Street marked the mixed start to the week.

Given the strong comments from Erdogan, CBRT is bound to announce rate cuts, which in turn favors USD/TRY bulls, for now. However, the latest rally may consolidate should the US dollar weakness magnify, maybe on the back of risk-on mood, during the day.

Technical analysis

Unless declining below an ascending support line from mid-April around 8.4330, USD/TRY is ready to cross the yearly top, also the record high of 8.6165.

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