The Pound to Turkish Lira exchange rate has advanced this week as a Brexit speech from Britain’s Prime Minister left markets impressed. However, TRY sentiment has improved slightly keeping GBP/TRY below last week’s decade-high of 4.80. The pair trended just below 4.70 at the time of writing.
Pound (GBP) Sturdy as Brexit Optimism Improves
Sterling has put in one of its best weeks in months thanks to a Brexit speech made by UK Prime Minister Theresa May.
In her speech, May made it clear that the UK would be a tough negotiator on global trade and would not become anti-globalisation as some investors feared.
While she stated that the UK government would not be able to keep full EU single market access, she stated she would not settle for a bad UK-EU trade deal.
This confident tone was enough to send Sterling surging and despite a profit-taking dip Sterling has held its best weekly levels against the Turkish Lira.
Turkish Lira (TRY) Steadies on Hopes for TCMB Currency Support
Demand for the Turkish Lira has been extremely volatile and in recent months due to political instability in Turkey. Lower demand for emerging-market currencies amid global uncertainties has also kept the currency weak.
However, there is hope in markets that the Turkish Lira’s volatility will cool slightly soon, as the Central Bank of the Republic of Turkey (TCMB) announced this week that it would take action to support the local currency.
The TCMB announced that it would swap Liras from domestic banks for US Dollars to pay back at a due date with a predetermined interest rate. This is expected to reduce the Lira’s high liquidity.
Trump’s Inauguration Could Undermine Risk-Demand
While the Central Bank of the Republic of Turkey’s (TCMB) announcement may help bolster the mid to long-term stability of the Turkish Lira, the currency has still had a poor week and is likely to fall further on Friday.
Friday will see the inauguration of Donald Trump as the 45
th
US President. The highly unorthodox world leader has filled markets with trade uncertainty that is sure to make risk-correlated emerging market currencies unappealing for solid periods.
As a result, the Pound to Turkish Lira exchange rate is expected to end the week higher, particularly with Sterling sentiment still strong.
Next week, GBP/TRY could continue advancing as the UK Supreme Court will finally make its judgement on the 24
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on whether to uphold the High Court ruling that Article 50 must be activated through Parliament.