- USD/TRY posts decent gains after two pullbacks in a row.
- Despite the recent steady hand, the CBRT remains in the limelight.
- US Nonfarm Payrolls come up next in the calendar.
The Turkish lira reverses part of the recent strength and now lifts USD/TRY back to the 8.3000 region at the end of the week.
USD/TRY cautious post-CBRT decision
After two consecutive daily drops, USD/TRY reclaims some composure and retests the 8.3000 region, as investors continue to digest the latest CBRT meeting on Friday.
Thursday’s positive session for the lira came after the Turkish central bank (CBRT) left unchanged the One-Week Repo rate at 19.00%, falling in line with markets’ forecasts.
In its statement, the central bank reinforced its pledge to use all available tools to bring down the rampant inflation, which showed the CPI rising more than 17% on a year to April. However, the CBRT left the door open to potential interest rate cuts after once again reiterating that rates will be set above inflation (unchanged from the April statement).
Supporting the latter, it is worth recalling that the central bank sees inflation peaking in April and expects it to grind lower to around 12.2% by year-end.
In the calendar, the US Nonfarm Payrolls (978K exp.) will take centre stage later in the NA session seconded by the Unemployment Rate (5.8% exp.).
What to look for around TRY
The near-term outlook for the lira remains fragile to say the least. Despite keeping rates unchanged at its meeting, Governor S.Kavcioglu is gradually expected to reverse (wipe out) the shift to a market friendly approach of the monetary policy that was successfully implemented by former Governor N.Agbal back in November 2020. Against this, it will surprise nobody to see the CBRT returning to the unorthodox/looser monetary stance in the next months, opening the door to further lira depreciation, FX reserves exodus and rising bets on a Balance of Payment crisis. Against this backdrop, it will surprise nobody to see spot trading around 10.00 in the medium-to-longer run.
Eminent issues on the back boiler: Potential US/EU sanctions against Ankara. Government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Much-needed structural reforms. Growth outlook vs. progress of the coronavirus pandemic. Capital controls? The IMF could step in to bring in financial assistance.
USD/TRY key levels
So far, the pair is advancing 0.29% at 8.2951 and faces the next up barrier at 8.3710 (weekly high May 4) followed by 8.4840 (2021 high Apr.26) and then 8.5777 (all-time high Nov.6 2020). On the other hand, a drop below 8.1316 (weekly low Apr.29) would aim for 7.9937 (weekly low Apr.15) and then 7.9434 (50-day SMA).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.