USD/TRY sets sail further north: Next stop seen just above 17.00

The bearish mood around the Turkish currency remains well and sound and now lifts USD/TRY to a new 2022 high past 15.60 at the beginning of the week.

USD/TRY looks to Ukraine, dollar

USD/TRY now advances uninterruptedly since May 5 and reaches fresh peaks in an area last visited back in mid-December 2021, just before the violent spike to the all-time highs beyond the 18.00 mark (December 20 2021). Immediate to the upside emerges the December 17 2021 high at 17.0446.

The lira saw its decline gather extra pace soon after inflation figures in Turkey rose to around 70% in April, as per latest CPI figures released earlier in the month. Adding to the sour sentiment around the currency, the war in Ukraine is already lasting more than initially estimated and is prolonging further the impact on energy and commodity prices in the domestic economy.

Data wise in Turkey, the Current Account deficit widened a tad to $5.55B in March and the Budget balance saw a TL50.17B rise during the last month.

What to look for around TRY

USD/TRY keeps the upside well and sound for yet another session and seems to have shifted its focus to the 16.00 mark for the time being. So far, price action in the Turkish currency is expected to gyrate around the performance of energy prices, the broad risk appetite trends, the Fed’s rate path and the developments from the war in Ukraine. Extra risks facing TRY also come from the domestic backyard, as inflation gives no signs of abating, real interest rates remain entrenched in negative figures and the political pressure to keep the CBRT biased towards low interest rates remains omnipresent.

Key events in Turkey this week: Current Account, Budget Balance (Monday) – Consumer Confidence (Friday).

Eminent issues on the back boiler: FX intervention by the CBRT. 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. Structural reforms. Upcoming Presidential/Parliamentary elections.

USD/TRY key levels

So far, the pair is gaining 1.20% at 15.6342 and faces the next hurdle at 15.6349 (2022 high May 16) seconded by 18.2582 (all-time high December 20) and then 19.00 (round level). On the other hand, a drop below 14.6836 (monthly low May 4) would expose 14.5458 (monthly low April 12) and finally 14.5136 (weekly low March 29).