Previously hamstrung by Russian sanctions that gutted tourism to the country in May, the Turkish Lira has struggled to garner support as global risk appetite remains low following the UK’s vote to leave the European Union.
In reaction to the Brexit, the Pound Turkish Lira exchange rate immediately plummeted over a quarter of a Lira. However, TRY gains were muted as global risk aversion weighed heavily on the currency.
Currently the pair is trading at 3.8039 after rallying 0.20% over this morning’s session with demand for the Lira still limited amid global risk aversion and the ongoing threat of terrorism in the country.
Pound sees Further Loses as Sixth Commercial Property Fund Suspends Withdrawals
The Pound has recently experienced an extended period of devaluation in relation to the UK’s referendum on its European Union membership on the 23
rd
of June.
As the results became clear and it was apparent the country was heading for a Brexit, the Pound slumped over 10% across the board almost instantaneously. The vote has brought market volatility to record levels and global risk aversion has been markedly high since before the fateful vote.
Sterling plunged lower following the initial depreciation as real-world Brexit consequences begin to ‘crystallise’. Over the course of this week, six commercial property investment funds were forced to halt withdrawals amidst a high number of redemption requests. In an attempt to stem any further commercial property price depreciation, trading was halted to allow for appropriate time and care to be taken in liquidating assets for investor capital.
The freeze is worrying as it represents over half of the UK’s £25 billion commercial property investment sector. Reports show roughly 75% of UK small businesses use such assets as collateral for loans so a drop in value could easily see small business growth hamstrung as they lack the capital.
If the UK political scene can come together and rally behind a leader ready to guide us through these tumultuous times, there is a chance the Pound could rally as expectations for the UK’s future would be more positive if a decisive post-Brexit plan emerges.
Turkish Lira Struggles to Find Support Amid Terror Threat
Turkey was recently victim to a horrific terrorist attack at its largest airport that saw 45 people dead and almost 250 people injured, possibly in relation to Turkey stepping up efforts to tackle the so called ‘Islamic State’.
This marks the third terrorist attack in the country this year by assumed Islamic militants. CIA director John O. Brennan suggested Turkey was now feeling the brunt of its leader’s previous ‘wilful ignorance’ of the extremist group amidst efforts of the increasingly autocratic head of state Recep Tayyip Erdogan to mend foreign relations.
Some positive news has surfaced from the region. Turkey-Israeli relations have been slowly restored after more than six years of animosity following the deadly Gaza flotilla raid. Turkish aid arrived in Gaza after previous efforts by Turkey to get Israel to lift the blockade on the Gaza Strip failed during negotiations.
This may be a sign of increasing political and economic stability for Turkey. If global risk sentiment rises, we could expect to see a possible rise in demand for the Turkish Lira as central bank rates keep the currency lucrative.