Turkish Lira: Disinflation supports gradual TRY repricing – ING

FXStreet Insights Team FXStreet

ING analysts Muhammet Mercan, Frantisek Taborsky and James Wilson say normalising liquidity and a lower effective funding rate have pushed market pricing closer to their Central Bank of Turkey rate view for 2026. They highlight limited foreign inflows into TurkGBs and see USD/TRY at 52 by year-end and 63 by end-2027 as reserves recover.

Lira outlook steady with carry support

"The Central Bank of the Republic of Türkiye (CBRT) has lowered the effective funding rate from 40% to 37%, citing easing inflation risks, weaker domestic demand, and improving monetary transmission. Growth is slowing, inflation should fall below 30% this year, reserves have markedly recovered, and the CBT has resumed asset purchases while markets increasingly anticipate future rate cuts."

"Following the normalisation of liquidity conditions, the decline in the effective funding rate from 40% to 37%, and the easing of upside inflation risks, market pricing has gradually turned more dovish and moved closer to our forecast for this year. The CBT rate is now priced at 34.50% for year-end."

"However, the market remains sceptical that the central bank can sustain easing next year, pricing in only around 100bp of cuts. We see scope for further repricing if disinflation continues in this part of the curve. Meanwhile, foreign inflows into TurkGBs remain limited, and the Ministry of Finance has completed about two-thirds of this year’s issuance. A meaningful improvement in duration would probably require a significant de-escalation in the US-Iran conflict."

"In FX, the outlook is broadly unchanged. As sentiment improves, the lira is typically the first market segment to attract returning investors. Long TRY positioning has already recovered to levels seen before the US-Iran conflict, despite the CBT’s unexpectedly dovish stance in August and the prospect of an imminent restart of the easing cycle."

"Meanwhile, the continued recovery in central bank FX reserves should help sustain investor interest in the TRY carry trade. We forecast USD/TRY at 52 by year-end and 63 by the end of next year."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD bounces back toward 0.6950 on fresh USD supply

AUD/USD bounces back toward 0.6950 in the Asian session on Friday. The US Dollar retreats from 17-month highs as traders take profits off the table ahead of the all-important US Nonfarm Payrolls report. Meanwhile, the Australian Dollar draws support from reviving expectations of a November interest rate hike amid elevated global yields and inflation risks.

USD/JPY struggles near 158.00 as USD retreats ahead of NFP

USD/JPY is struggling for fresh impetus near 158.00, moving away from the top end of its weekly range in the Asian session on Friday, after hotter-than-expected Tokyo CPI and amid a broad US Dollar retreat. Traders reposition themselves ahead of US Nonfarm Payrolls.

Gold fades the earlier optimism; back below $4,200

Gold could not sustain the post-NFP bull run past the $4,200 mark per troy ounce, receding toward the $4,180 region at the end of the week. The precious metal’s inconclusive price action comes amid fresh selling pressure hurting the US Dollar as investors assess the latest NFP data.

Week ahead: Fed minutes in the spotlight amid bond market rout

The first full week of October and the final quarter of the year get underway with little fanfare in terms of the economic agenda. But far from being short on excitement, the coming week will test market nerves, as government bond yields continue to soar on growing worries that the energy crisis will only get worse, fuelling inflation.

CFTC Report: Speculators turn more defensive as Oil exposure falls

The week in one sentence: During the week leading up to September 29, long positions in crude oil were significantly reduced, while short positions in the Canadian Dollar went up. In addition, the positioning of the Australian Dollar and the Japanese Yen declined, while Coffee buying stood out against a more general background of defensiveness.

The Euro is near a one-year low: Inflation could trigger its rebound, not its fall

EUR/USD has fallen to its lowest level since May 2025. The pair hit 1.1312 on Wednesday and trades well below the January peak of 1.2082. The decline reflects a powerful combination of US Dollar strength, geopolitical uncertainty and renewed concerns about Europe's exposure to higher energy prices.