USD/TRY at new highs above 18.33, with attention on the Fed and the CBRT

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  • USD/TRY hits new all-time highs north of 18.30.
  • The Fed is expected to raise rates by 75 basis points later.
  • The CBRT meets Thursday amid a divided consensus.

The TRY depreciates further and contributes to the USD/TRY reach new all-time highs around 18.32 on Wednesday.

USD/TRY remains bid ahead of FOMC and CBRT

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The USD/TRY remains optimistic to the letter so far this week and manages to advance beyond the 18.30 zone and at the same time mark new all-time highs, always based on the intense rally of the dollar, as well as the omnipresent bad prospects for the lira.

Meanwhile, the pair is poised to prolong gains for now on the back of the Fed’s tightening stance – likely to be confirmed on Wednesday – and the absence of any serious action by Ankara to quell entrenched inflation.

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As for the latter, President Erdogan’s comments on Tuesday that inflation is not an “insurmountable economic threat” (and that it will start to decline towards the end of the year) seem to have buttressed the widespread investor perception that there are no plans. solid to lower inflation.

The Turkish central bank (CBRT) meets on Thursday and opinions among market participants remain divided on whether the central bank will impasse to assess the effects of the August rate cut, or emphasize a resumption of the cycle of flexibility.

What to look for around the TRY

USD/TRY maintains the underlying gradual uptrend and looks to consolidate the recent breakout of the 18.30 area.

So far, the price action around the Turkish lira is expected to continue to revolve around the behavior of energy and commodity prices – which are directly correlated to the events of the war in Ukraine – trends general risk appetite and the path of the Fed rates in the coming months.

Additional risks facing the Turkish currency also come from within, as inflation shows no signs of abating (despite rising less than expected in July and August), real interest rates remain well entrenched in negative territory and political pressure for the CBRT to go for low interest rates remains pervasive.

Furthermore, the lira will continue to suffer in the context of Ankara’s plans to prioritize growth (through higher exports and tourism revenues) and improving the current account.

Key events in Türkiye this week: Consumer Confidence, CBRT Interest Rate Decision (Thursday).

Technical levels

So far the pair is gaining 0.10% at 18.3193 and faces the next hurdle at 18.3327 (21st Sep all-time high) seconded by 19.00 (round level). To the downside, a break below 17.9187 (55-day SMA) would expose 17.8590 (weekly low Aug 17) and finally 17.7586 (monthly low).

Source: Fx Street

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