The Pound to Turkish Lira exchange rate has neared its best levels since Britain voted for Brexit in June, as bullishness in the Pound and considerable Lira weakness have aided GBP/TRY advance. As it stands, GBP/TRY is on track to end the week about 10% higher.
Pound (GBP) Takes Advantage of Soaring Retail Sales Figures
Despite factors like ongoing Brexit worries weighing on the Pound this week, the currency has been able to largely hold its ground with investors turning focus to the US Dollar.
This also made it easier for Sterling to eventually advance in reaction to this week’s UK retail sales figures from October.
When they were published on Thursday, investors were initially hesitant to go bullish on the Pound due to analysis that retail sales would likely slump in the coming months after a run of strong figures.
However, ultimately the results were just too strong to resist. Month-on-month retail sales gro 2.0%, beating 0.4% expectations. September’s score was revised from a stagnant 0.0% to 0.1%.
Yearly retail sales were even more impressive, surpassing an expected jump from 4.0% to 5.4% by surging to 7.6%.
Turkish Lira (TRY) Undermined by Lack of Emerging Market Demand
The Turkish Lira has performed weakly since the election of Donald Trump as the next US President left emerging markets fretting about how their trade positions could be harmed under a protectionist Trump administration.
US Federal Reserve interest rate hike bets also continue to increase, leading to weakening demand for the risky Lira, with traders seeking out safer assets than emerging market currencies.
Turkey in particular, amid its current domestic political tensions and tensions with Europe and the US, has seen considerable market jitters since the US election. According to
Bloomberg
, the Lira has even breached its worst value estimates against the US Dollar this year.
GBP/TRY Forecast: Is a Rebound on the Cards?
If the Pound to Turkish Lira exchange rate continues to advance at this pace, it won’t be long before the pair returns to levels not seen since before Britain voted to leave the EU in June – which is a recovery Sterling has come nowhere near in many other exchange rates.
However, this would depend on Pound sentiment remaining strong and Lira sentiment remaining weak. While these things are likely, the velocity of gains is likely to slow.
After consecutive weeks of bearishness, it’s only a matter of time until traders decide to buy the Lira up from its lowest levels the next time markets have an appetite for emerging market currencies.
As December approaches though these chances become slimmer. With the Federal Reserve likely to hike US interest rates in December, a Turkish Lira recovery rally may not occur for almost a month.
Sterling demand is also likely to slow as Brexit concerns continue weighing on the British currency, but again the Pound has an opportunity to continue advancing in December if the UK Supreme Court denies the government’s challenge to independently activate Article 50 and begin the Brexit process.