Although Turkey published some encouraging domestic data on Monday, the Turkish Lira dropped by more than 0.5% against the Pound and hit a new low against the US Dollar.
The Lira experienced a particularly volatile 5-days of trading last week as the Turkish Central Bank’s decision to call off an unscheduled meeting (at which it planned to cut interest rates) boosted the currency, only for the nation’s President to condemn the action and push the Lira lower almost immediately afterwards.
The Pound Sterling to Turkish Lira (GBP/TRY) exchange rate fluctuated between highs of 3.80 and lows of 3.63 over the course of the week while the US Dollar to Lira (USD/TRY) exchange rate jumped from 2.40 to 2.49.
The GBP/TRY uptrend was aided by the UK’s impressive Manufacturing, Construction and Services PMI and the US Dollar was able to extend and consolidate gains against its Turkish peer thanks to an impressive US Non-Farm Payrolls report.
At the start of this week the Lira slumped to a fresh record low against the US Dollar as the Turkish central bank came under further pressure to cut interest rates.
On Sunday President Recep Tayyip Erdogan slammed the central bank once again, arguing that it wasn’t taking a proactive enough approach to cutting interest rates and supporting the nation’s economy.
According to strategist Charlie Robertson; ‘The Lira is paying the price for a loss of faith in the central bank. The monetary policy is getting too politicised.’
The Lira’s downtrend continued despite the fact that Turkish industrial production was shown to have surged by 2.6% on the year in December, up from an annual increase of 0.7% in January and beating expectations for a figure of 2.51%.
As the week continues, demand for the Lira may remain weak if it appears Turkey’s two major political and economic institutions, President Erdogan and the central bank, are likely to continue clashing.
Investors with an interest in the currency will also be focusing on Turkey’s current account figures, scheduled for release on Wednesday.
Meanwhile, the UK’s Manufacturing/Industrial Production reports could have an impact on the direction taken by the Pound to Turkish Lira pairing, as could the UK’s growth estimate for the three months through January.
This week’s main USD/TRY mover is likely to be the US Advance Retail Sales report. The data, scheduled for release on Thursday, is expected to show a monthly decline of -0.5%. A steeper drop than this would be ‘Greenback’ negative.
The US Dollar to Turkish Lira (USD/TRY) exchange rate was trading in the region of 2.4839 on Monday, while the Pound Sterling to Turkish Lira (GBP/TRY) exchange rate achieved a high of 3.8048.