TRY Gains on GBP Following UK Inflation Data

The Pound tumbled dramatically against the Turkish Lira following the news that UK inflation is at its highest level since June 2014.

The Turkish Lira, meanwhile, has been bolstered by rising risk appetite.

Major Pound Losses Seen as UK Inflation Falls Short of Forecast

The main focus for GBP investors today has been on UK inflation, which has risen from 1.6% to 1.8% on the year in January. While an impressive rise, this figure was still below the expected 1.9% result, which led to GBP weakening and falling by -1% against the Lira.

Further upset was caused by the monthly  figure, which fell from 0.5% to -0.5% (this time matching forecasts).

Some economists took a hawkish outlook after this news, with PricewaterhouseCoopers Chief Economic Advisor Andrew Sentence estimating 3% inflation by the end of 2017.

European Commission Forecast Buoys Turkish Lira against Current Account Deficit Damage

With the US Dollar softened by yet another Trump administration scandal, the Turkish Lira has had a clear path to rise against the Pound this week.

Other outside news has also boosted TRY demand, with the European Commission (EC) Winter Forecast predicting Turkish GDP to rise by 2.8% in 2017 and 3.2% in 2018.

Turkish domestic data hasn’t been especially supportive this week, with the December current account deficit expanding from -2.24bn to -4.27bn; this was a slight improvement on the forecast -4.63bn result.

GBP/TRY Exchange Rate Forecast

For the rest of the week, Pound Sterling/Turkish Lira exchange rate movement may occur as a result of UK jobs data out over Wednesday morning, as well as UK retail sales stats expected on Friday.

Sterling may be in the worst of both worlds on Wednesday morning given that UK earnings stats for December are due. With the Pound already devalued by a forecast-missing inflation figure, insult could be added to injury if wage growth is shown to have slowed in December.

Such an outcome would imply that inflationary pressures are set to hit UK consumers in the future.

The UK’s unemployment rate and claim count figures are also expected on Wednesday; unemployment is forecast to remain at 4.8% while a small rise in claimants is expected.

Friday will bring UK retail sales results, which are due to show gains on the month in January but slowdowns on the year.

The only remaining Turkish data release this week is Wednesday’s November unemployment rate; the EC has forecast overall Turkish unemployment to rise to 11.2% in 2017 and to 11.5% in 2018.

Oliver Meredew

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