USD/TRY surpasses 21.00 to print fresh all-time highs

There seems to be no respite for the weakness of the Turkish lira. That said, USD/TRY clocked a new record high well north of the 21.0000 mark on Monday.

USD/TRY: Further upside looks likely

USD/TRY maintains its firm bullish bias for yet another session and this time breaks above the 21.0000 mark with marked conviction, as investors remain highly apathetic following the announcement of new members of Erdogan’s cabinet.

Recently appointed Treasury and Finance Minister M. Simsek said over the weekend that returning to "rational ground" is necessary to ensure predictability in the economy and emphasized that the new government's primary objective will be to enhance social welfare.

It is worth noting that the lira has already lost more than 14% since January.

In the docket, inflation figures in Turkey tracked by the headline CPI rose at an annualized 39.59% in May and 0.04% vs. the previous month. It was the first reading below 40% since December 2021. In addition, the Core CPI (CPI excluding energy, food, non-alcoholic beverages, alcoholic beverages, tobacco, and gold) rose 46.62% YoY.

What to look for around TRY

USD/TRY maintains its upside bias well in place, always underpinned by the relentless meltdown of the Turkish currency.

In the meantime, investors are expected to closely monitor upcoming decisions on monetary policy, particularly after President R. T. Erdogan named former economy chief M. Simsek as the new finance minister following the cabinet reshuffle in the wake of the May 28 second round of general elections.

The appointment of Simsek has been welcomed with optimism by market members in spite of the fact that it is not yet clear whether his orthodox stance on monetary policy can survive within Erdogan’s inclination to battle inflation via lower interest rates.

In a more macro scenario, price action around the Turkish lira is supposed to continue to spin around the performance of energy and commodity prices - which are directly correlated to developments from the war in Ukraine, broad risk appetite trends, and dollar dynamics.

Key events in Türkiye this week: CPI, Producer Prices (Monday) – Industrial Production (Friday).

Eminent issues on the back boiler: Persistent skepticism over the CBRT credibility/independence. Absence of structural reforms. Bouts of geopolitical concerns.

USD/TRY key levels

So far, the pair is gaining 1.70% at 21.2381 and faces the next hurdle at 21.3119 (all-time high June 5) followed by 22.00 (round level). On the downside, a break below 19.5366 (55-day SMA) would expose 19.2216 (100-day SMA) and finally 18.8743 (200-day SMA).