• USD/TRY keeps the consolidative trade well in place.
  • No reaction to the recent steady stance from the CBRT.
  • Turkey’s finmin sees inflation at around 40% in the next months.

Consolidation seems to be the new name of the game around USD/TRY, as it continues to trade within the 13.00-14.00 range since the beginning of the new year.

USD/TRY looks stabilized within 13.00-14.00

USD/TRY alternates gains with losses in the mid-13.00s, extending the prevailing side-lined mood for yet another session on Monday.

The lira seems to have derived some strength after Turkey’s finmin N.Nebati hinted at the idea that the domestic inflation could reach 40% in the next months earlier in the session, quite an ambitious target considering that consumer prices rose more than 36% in December vs. the same month of 2020 and Producer Prices gained almost… 80% YoY. Nebati also ruled out further tightening by the CBRT in the form of interest rate hikes.

In the meantime, there was no meaningful reaction in the FX space after the Turkish central bank (CBRT) left the One-Week Repo Rate unchanged at 14.00% at its meeting last Thursday, matching the broad consensus.

What to look for around TRY

The pair keeps the multi-session consolidative theme well in place, always within the 13.00-14.00 range. Higher-than-expected inflation figures released earlier in the year put the lira under extra pressure in combination with some cracks in the confidence among Turks regarding the government’s recently announced plan to promote the de-dollarization of the economy. In the meantime, the reluctance of the CBRT to change the (collision?) course and the omnipresent political pressure to favour lower interest rates in the current context of rampant inflation and (very) negative real interest rates are forecast to keep the domestic currency under pressure for the time being.

Key events in Turkey this week: Capacity Utilization, Manufacturing Confidence (Tuesday) – Economic Confidence Index (Friday).

Eminent issues on the back boiler: 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. Much-needed structural reforms. Growth outlook vs. progress of the coronavirus pandemic. Earlier Presidential/Parliamentary elections?

USD/TRY key levels

So far, the pair is retreating 0.11% at 13.4107 and a drop below 12.7523 (2022 low Jan.3) would pave the way for a test of 12.7471 (55-day SMA) and finally 10.2027 (monthly low Dec.23). On the other hand, the next up barrier lines up at 13.9319 (2022 high Jan.10) followed by 18.2582 (all-time high Dec.20) and then 19.0000 (round level).