Over the past seven days the Pound Sterling to Turkish Lira exchange rate was trending within the range of 4.2238 to 4.2641.
In the early stages of the week the Lira struggled versus its major peers in response to damp market sentiment. With global stock prices in a rout, and oil prices extremely volatile, trader risk aversion strategies saw the Lira decline thanks to its emerging-market status. Even relatively positive Industrial Production of 4.5% in December wasn’t enough to provoke a marked appreciation. Stagnant retail sales in December also hindered Lira demand, with geopolitical uncertainty adding to the depreciation.
The British Pound, meanwhile, has put on a mixed performance against its major peers this week. A general depreciation can be linked to the disastrous combination of weak growth outlook, weak inflationary outlook, political uncertainty and reduced bets regarding the likelihood of a Bank of England (BoE) rate hike in 2016. Of particular detriment was the NIESR Gross Domestic Product estimate for January which showed growth slowed to 0.4%.
On Friday the Turkish Lira advanced versus most of its currency competitors despite ongoing geopolitical tensions and issues with immigration. The appreciation can be linked to improved risk appetite. Traders sought high-yielding assets after the rising price of crude eased the global stock rout, with European stocks leading the surge. With Turkey at the centre of an all-out war with simultaneous pressure from Syria, Iraq and Russia there is a high likelihood that the Lira will resume depreciation.
Friday’s European session saw the Pound advance versus many of its peers thanks to its comparatively low trade weighting. Such was the Pound’s depreciation on Thursday, in response to bets that the BoE will not look to alter monetary policy until 2020, traders took advantage of attractive buying opportunities on Friday. Many analysts predict that Sterling will continue to struggle versus its major peers for some time to come, however, with growth and inflation outlook remaining bleak.
Looking ahead there will be a number of ecostats with the potential to provoke significant GBP/TRY changes over the coming week. Monday will see Turkey’s Unemployment Rate for November, which printed at 10.5% previously. Tuesday’s British Inflation data will be hugely significant. This is because low consumer prices in the UK have been the principle stumbling block preventing the Bank of England from hiking the benchmark interest rate. Friday’s Turkish Consumer Confidence report will also have the potential to cause GBP/TRY volatility.