Over the past month, the Pound Sterling to Turkish Lira (GBP/TRY) exchange rate was trending within the range of 4.3020 to 4.6698.
Since it became clear that China’s economic growth was slowing and the equity markets were crashing, emerging-market assets have generally declined versus their major peers. In mid-August the Pound Sterling to Turkish Lira (GBP/TRY) exchange rate advanced to over a 10-year high as slumping global growth dashed trader risk-appetite. The Lira has been one of the hardest hit assets in response to China’s economic woes as geopolitical tensions and political uncertainty makes for a very unattractive investment.
Over the past month, Turkish data has produced varied results but the publications had comparatively minimal impact on Lira volatility as domestic difficulties and the global economic slowdown completely overshadowed data. One particularly positive ecostat was May’s Unemployment Rate which dropped beyond expectations from 9.6% to 9.3%. Of particular disappointment was August’s Manufacturing PMI which declined from 50.1 to 49.3, breaking through the 50 mark which separates growth from contraction.
The Pound Sterling to Turkish Lira (GBP/TRY) exchange rate was trending in the region of 4.6470 during Tuesday’s European session.
With China’s woes showing little sign of abating, demand for emerging-market assets continues to slump. The Lira remains particularly vulnerable as Turkey vows to ‘wipe out’ Kurdish rebels who killed a number of Turkish soldiers on Sunday. The likelihood of full scale military action has heightened significantly and when viewed in conjunction with mounting political uncertainty ahead of the November general election, investment in the Lira remains subdued. ‘The Turkish lira is still one of the most vulnerable EM currencies due to prevailing domestic tension,’ confirmed Jane Foley, FX strategist at Rabobank.
In addition to China’s economic struggles weighing on demand for the emerging-market Turkish Lira, the prospect of a near-term Federal Reserve benchmark rate hike is also causing headwinds. Although many fear that the Fed will delay a cash rate increase in the face of China’s slowdown, should the Federal Open Market Committee (FOMC) hike the rate before the close of 2015 the Lira is likely to tumble further.
Looking ahead, Turkish data is unlikely to be particularly impactful with trader focus dominated by geopolitical tension and uncertainty. With that being said, Thursday September 10
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will see the publication of Turkish Gross Domestic Product for the second-quarter which has enough economic weighting to provoke changes for the Lira. On Tuesday September 22
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the Central Bank of the Republic of Turkey interest rate decision is due. Given the difficult domestic situation and the detrimental impact of outside influences, there is a high possibility that the central bank will look to ease policy.
The Pound Sterling to Turkish Lira (GBP/TRY) exchange rate was trending within the range of 4.6193 to 4.6503 during Tuesday’s European session.