Last week the Turkish Lira fell to another record low against the US Dollar (USD/TRY) as President Recep Tayyip Erdogan continued his campaign to undermine the authority of the Central Bank of the Republic of Turkey (TCMB).
Erdogan expressed anger and frustration at the central bank’s refusal to cut interest rates aggressively in order to reduce domestic inflation and drove the Lira broadly lower in the process.
He has previously lamented the independence of the institution and its reluctance to act in accordance with his wishes regarding monetary policy.
The US Dollar to Turkish Lira exchange rate went on to fluctuate between highs of 2.51 and lows of 2.44 over the next five days.
The Lira recovered some ground against the ‘Greenback’ following the publication of less-than-impressive US retail sales and consumer confidence data however, as the reports prompted some industry experts to suggest that the Federal Reserve might delay hiking interest rates.
Retail sales had been expected to fall by -0.4% in December but they actually declined by -0.8%. Similarly, the University of Michigan Confidence index slumped from a multi-year high of 98.1 in January to 93.6 in February. A static reading had been anticipated.
At the beginning of this week USD/TRY movement was limited due to a lack of influential economic data for either the US or Turkey.
On Tuesday the ‘Greenback’ came under a little pressure following the release of the US Empire Manufacturing index, which dipped from 9.95 to 7.78 in February instead of printing at 8.00 as expected.
The nation’s NAHB Housing Market Index also failed to show the improvement expected and instead dipped from 57 to 55.
In the days ahead the pairing could experience movement as a result of the latest batch of Federal Open Market Committee meeting minutes. Should the minutes offer any hints as to the timing of the first interest rate hike or contain a change of rhetoric; the US Dollar is likely to strengthen.
Investors with an interest in the US Dollar to Turkish Lira (USD/TRY) exchange rate will also be focusing on the publication of Turkey’s Consumer Confidence Index for February – due out on Thursday at 08:00 GMT.
Given the recent verbal spats between Turkey’s leader and its most prominent financial institution, it’s perhaps unsurprising that the measure of consumer sentiment is expected to slide to 67.1 in February from 67.7.
Other US reports with the potential to insight USD/TRY exchange rate movement include the US initial jobless/continuing claims figures, the Philadelphia Fed Index and Markit’s Manufacturing PMI.
During the European session the US Dollar to Turkish Lira (USD/TRY) exchange rate was trading in the region of 2.4496, down from the day’s high of 2.4579.