USD/TRY: calm before the storm?

USD/TRY: calm before the storm?

2019-11-11 • Updated

The consumer inflation in Turkey increased to 24.5% in September - the highest level since August 2003. Producer prices increased by 46.2% as well. The reason for it lies in existing currency crisis and the US sanctions against two Turkish diplomats. However, it seems like the Turkish lira has reacted to this data weakly. Since the release of the consumer inflation indicator USD/TRY has gained a little. It got support at 5.97 (50-day MA) and started moving towards the resistance at 6.0950. 

Turkey inflation.png

If we look at the bigger picture, the Turkish lira was gaining against the US dollar in September. The latest tensions in the price of USD/TRY are connected with the central bank decision. The Central bank of Turkey (TCMB) decided to increase the interest rate from 17.75% to 24% on September 13, 2018.  At the same time, Turkish president Tayyip Erdogan was calling for lower rates to create cheaper credit flowing. As a result, USD/TRY dropped from 6.3234 to 6.0591 in just one day.  The recent discussion between Erdogan and German Chancellor Angela Merkel on the future relations between Turkey and the EU supported the lira as well during the last month.

USDTRYDaily.png

Nevertheless, inflation is not the only indicator which signals about the contraction of Turkish economy. Manufacturing purchasing manager’s index decreased to 42.7% in September. To compare with, it was 55.7 in January. The possible solution to the current economic problems could be solved by the tight monetary policy of TCMB. Finance minister Berat Albayrak already said that discussions on fighting the inflation would begin on Thursday. 

Can the next rate hike move the lira up against the US dollar? Well, hardly. Big increases of interest rates can lose their significance. For instance, despite Argentina raised its interest rate from 45% to 60%, the peso kept decreasing.

To sum up, the possible solution for USD/TRY traders is to wait until further comments by Turkish Central bank. To see more significant changes for the Turkish lira, it probably needs the changes in the country’s leadership, cancelation of the US sanctions and much better economic fundamentals.

For now, if the pair gains and break the resistance at 6.0954, it will resume to follow the uptrend.

Similar

TRY: questionable grounds
TRY: questionable grounds

The Turkish Central Bank is on a rate-cutting path; on February 19 it will make another announcement. What's the logic behind?

Can Turkish lira regain support?
Can Turkish lira regain support?

This week, the Turkish lira has experienced a selloff, and USD/TRY jumped to the highest levels since the end of August in the 5.88 area.

Latest news

Can USD Recover?
Can USD Recover?

The EUR/USD pair is making gains, approaching multi-month highs around 1.0960, driven by a weakened USD and Christine Lagarde's somewhat hawkish remarks before the European Parliament. Minor housing data from the U.S., specifically New Home Sales for October, came in below expectations but didn't significantly impact the pair. Lagarde, President of the...

Stock Market Rally. How Far Can It Go?
Stock Market Rally. How Far Can It Go?

Global equities on Wall Street experienced a mixed session following the Thanksgiving holiday, heading for the most significant one-month rally since November 2020. MSCI's global shares index slightly eased but was still on track for an 8.5% monthly gain, fueled by growing investor confidence that U.S. interest rates...

OPEC Boosts The Oil Market
OPEC Boosts The Oil Market

Brent crude futures is maintaining stability this Friday, with traders awaiting an OPEC+ meeting that might lead to further supply cuts. Brent crude was down 8 cents at $81.34 a barrel, following a 0.7% drop in the previous session.

Deposit with your local payment systems

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.

Callback

A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Next callback request for this phone number
will be available in

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera