Although Turkey has bucked the trend by continuing to benefit this month from the global commodity slowdown as the price of its oil imports have remained particularly low, the Pound Sterling to Turkish Lira (GBP/TRY) exchange rate has definitively remained in the region of an over ten-year high. Even so, the past week has seen a fair degree of movement for the pairing.
In spite of a decreased deficit revealed by the Turkish Balance of Trade and a poor performance for the UK’s Consumer Confidence Survey on Friday the GBP/TRY exchange rate still struck a fresh peak of 4.3594. Given the apparently healthy economic conditions in the UK the lower-than-expected figure clearly had a very limited impact on the currency, at least initially, although the afternoon saw the pairing slumping to 4.3092.
Monday’s Manufacturing PMI for Turkey came in at 50.1, a greater increase than the forecast 49.7, which edged the nation just over the baseline of 50 to indicate a return to growth for the sector. The year-on-year Inflation Rate for July, meanwhile, saw a decrease on the previous month to 6.8% from 7.2%. Bringing the rate closer to the 5% target of the Central Bank of Republic of Turkey, this also marked the index’s lowest point since January 2013. Together bolstering assertions that the Turkish economy is in a relative state of strength at present, these figures began a period of further oscillation for the GBP/TRY pairing.
UK PMIs were somewhat varied throughout the week, as Manufacturing posted an increase with Construction and Services dropping on previous figures. Due to the services sector accounting for the largest portion of the GDP, at over 70% compared to the 7% construction contributes, it was this figure that was afforded the greatest importance. In spite of the decline, however, investors remained positive, with the insistence that the sector was nevertheless holding up to economic strains. Consequently the Composite index, whilst falling, did not slide too far below expectations and hit 56.6 rather than 56.9.
Today, on so-called ‘Super Thursday’, the simultaneous release of the Bank of England (BoE) Rate Decision, Inflation Report and Monetary Policy Committee (MPC) meeting minutes spurred the GBP/TRY pairing into a sudden, major fall to 4.3594. Surprising pundits, with the vote split only 8-1 to hold interest rates at their current level when two or even three dissenters had been expected, the data saw Sterling turn dovish across the board. The decreased chance of a rate hike before the end of the year thus put a significant dampener on the Pound’s bullish run.
Tomorrow’s Turkish Retail Sales and Industrial Production figures could help the Lira consolidate this abrupt gain, should sales and output increase as expected or perhaps even rise above forecast. Otherwise the currency will be very dependent upon foreign data releases, such as the UK Trade Balance, for movement in the coming week, barring any significant political issues that may occur as local tensions escalate further against the Kurds.