USD/TRY retreats from tops near 8.5500
|- USD/TRY climbed to the 8.5500 area earlier on Tuesday.
- The pair resumes the upside following Monday’s pullback.
- Turkey’s Manufacturing PMI eased below 50.0 in May.
The Turkish lira gives away part of Monday’s gains and lifts USD/TRY back above the 8.5000 region on turnaround Tuesday.
USD/TRY targets the all-time highs above 8.60
USD/TRY posts decent gains above the 8.50 region and at the same time reverses part of the moderate retracement recorded at the beginning of the week.
In fact, the lira managed to regain some composure after recording new all-time lows vs. the dollar beyond 8.6100 on Friday.
It is worth noting that TRY has depreciated around 15% since President Erdogan removed former CBRT Governor N.Agbal in late March. The currency remains under heavy pressure amidst unabated inflationary pressures and rising political effervescence.
In the calendar, Turkey’s Manufacturing PMI slipped back to the contraction territory in May at 49.30 (from 50.40). The reading came in contrast to Monday’s better-than-expected GDP figures, which showed the economy expanded at an annualized 7.0% during the January-March period.
What to look for around TRY
The outlook for the Turkish currency remains fragile. Extra weakness in the lira has been exacerbated as of late after President Erdogan fired another CBRT deputy governor, all amidst a wider move including the replacement of several directors at the central bank. These decisions have done nothing but undermined further the credibility of the CBRT, intensifying at the same time the selling pressure on the lira. The political scenario continues to show cracks within the ruling AK Party, while the pandemic keeps taking a toll on the economic outlook. While the latter begs for the reduction of interest rates, the perseverance of high inflation calls for a rate hike, which would surely bring in some respite to the beleaguered currency.
Key events in Turkey this week: May CPI, PPI (Thursday).
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 0.47% at 8.5141 and faces the next up barrier at 8.6120 (all-time high May 28) ahead of 9.0000 (round level). On the other hand, a drop below 8.2982 (weekly low May 17) would aim for 8.2488 (50-day SMA) and then 8.1316 (weekly low Apr.29).
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.