The last week has been a fairly volatile one for the GBP/TRY exchange rate, in part thanks to the increasingly uncertain state of the Turkish political landscape and somewhat mixed UK economic data releases.
A decidedly negative impact upon the Lira came in the form of Saturday’s bombing of an Ankara peace march, reigniting concerns over Turkish national security and political stability. While this did see the GBP/TRY exchange rate surge to a then-weekly high of 5.5305 it was not long before the pairing began to lose ground once more. Like the other emerging-market currencies the Lira was boosted by the decreasing odds of a 2015 Fed interest rate rise, as the pressure of an over-strong US Dollar receded for the time being.
Another spike in the GBP/TRY pairing was brought about by the release of disappointing Chinese data, which exacerbated global slowdown fears with the Imports figure in particular contracting by an unexpectedly sharp -20.4%. However, a knock-on decline in commodity prices helped to support the Lira, easing the price of Turkish imports and offering the potential to narrow the national deficit ahead of the next Balance of Trade reading.
The prospects of the Pound, on the other hand, were weighed down by UK’s September Consumer Price Index as the figure unexpectedly printed negatively at -0.1%. Suggesting that inflationary pressure would not be sufficient to prompt the Bank of England (BoE) into an interest rate hike in the near future, this dovish number spurred economists to push back their predictions for the first step in monetary policy tightening, some even as far as 2017.
However, as Wednesday’s raft of UK employment figures were released the GBP/TRY exchange rate was prompted to surge to a fresh weekly best of 4.5310. In spite of a weaker Jobless Claims Change than forecast Sterling sentiment advanced on the back of an unexpected drop in the ILO Unemployment Rate. Clocking in at 5.4% this was the lowest domestic unemployment reading in seven years and coupled with a continuing climb in Average Weekly Earnings, this saw the Pound rally strongly against rivals.
On Thursday morning the Turkish Unemployment Rate for July printed at a slighter increase than pundits anticipated, rising to 9.8% rather than 10.1%. As an underwhelming US Advance Retail Sales figure had seen the odds of an imminent Fed rate hike decrease further, this more encouraging result pushed the Lira up in value. In response the GBP/TRY conversion rate has slumped significantly to cede back most of its weekly gains, trending in the region of 4.4758.
Further volatility could be in store for the Lira next week, with the upcoming Central Bank of the Republic of Turkey (CBRT) Interest Rate Decision. Although policymakers are expected to leave the local cash rate unchanged the tone of any accompanying commentary could stand to drive movement for the Lira. Continuing commodity weakness and further soft data from the US may also shore up the emerging-market currency in the days to come.