The Turkish Lira (TRY) weakened against the Pound Sterling (GBP) on Wednesday as the UK currency was bolstered by the release of better-than-forecast unemployment and average earnings data.
The Lira fell to new record lows earlier in the month as economists worried over the weakness of the Turkish economy and the interference of President Recep Tayyip Erdoğan in Turkish Central Bank affairs.
Turkey’s risk is rapidly closing in on the same levels seen in Russia as Erdoğan continues to lobby for increased presidential powers. Observers are concerned that Erdoğan’s play for more power will be a threat to the nation’s status as a secular society.
In August 2014, Erdoğan accomplished his long-standing dream of becoming Turkey’s first elected president. His success was then followed by the building of a presidential palace, which symbolises the shift in the nation’s political power structure. The massive structure cost a whopping £385 million to build; such extravagance is often seen in authoritarian regimes. Now Erdoğan wants to establish a semi-presidential regime that will grant him even more power.
It is not just the actions of Erdoğan that have spooked investors. If the ruling AK party fails to get enough votes to govern without a coalition in the June elections, he may be unable to push through policy changes to revive an economy hemmed in by higher crude prices and a 13% currency plunge this year.
The Pound Sterling, meanwhile, advanced against all of its major peers after the Office for National Statistics released data, showing that the UK’s unemployment rate fell to 5.5% in March. The figure was the lowest level since the summer of 2008. A separate report also showed that average earnings including bonuses increased 1.9% from the preceding months 1.7%. Average earnings excluding bonuses rose 2.2%, beating forecasts for a rise to 2.1%. Traders welcomed the solid figures and suggested that the Bank of England may be considering raising interest rates.
The Lira also weakened against the Euro due to the release of positive GDP data out of France and a better-than-forecast inflation report out of Germany. The Lira also weakened against the US Dollar.
In the long term, the Turkish Lira is expected to decline to new record lows against Sterling and the US Dollar as investors grow increasingly nervous as the June 7 election draws nearer.
The Pound Sterling to Turkish Lira exchange rate was trading in the region of 4.1778.