USD/TRY keeps the upside in place above 17.00 on steady CBRT

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  • USD/TRY trades close to the 2022 high near 17.40.
  • The CBRT left the interest rate unchanged at 14.00%.
  • Focus now shifts to the release of the CPI on July 4.

The Turkish lira retreats modestly and allows USD/TRY to trade at shouting distance from the 2022 highs near 17.40 on Thursday.

USD/TRY: Next on the upside comes 17.50

USD/TRY adds to Wednesday’s marginal gains and approaches the 17.40 region after the Turkish central bank (CBRT) left the One-Week Repo Rate unchanged at 14.00% at its meeting earlier in the session.

The lack of action from the CBRT surprised no one on Thursday, as it was well telegraphed by the bank’s authorities in past weeks as well as by President Erdogan’s usual comments against any tightening of the monetary policy.

There were no changes of note in the CBRT statement, where elevated domestic inflation remains largely due to the geopolitical conflict and high energy prices as well as supply-demand imbalances. The CBRT keeps favouring the “liraization” strategy and remains stubbornly attached to the 5% inflation target in the medium term.

Investors, in the meantime, should now shift their focus to the publication of June’s inflation figures due on July 4 (prev: 73.50% YoY).

What to look for around TRY

USD/TRY keeps the underlying upside bias well and sound and now surpasses the 17.00 mark, an area last traded back in December 2021.

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 remain omnipresent.

Key events in Turkey this week: Consumer Confidence (Wednesday) – CBRT interest rate decision (Thursday) – Capacity Utilization, Manufacturing 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 0.27% at 17.3637 and faces the next up barrier at 17.3728 (2022 high June 22) seconded by 18.2582 (all-time high December 20) and then 19.00 (round level). On the flip side, a breach of 16.3136 (monthly low June 3) would aim to 16.1431 (low May 27) and finally 15.6684 (low May 23).