GBP TRY Exchange Rate at 5-Month High

Friday has seen the Pound to Lira exchange rate rise to a five-month high, achieving the best levels since early February 2017.

Although the Pound has been generally weaker due to a bout of poor domestic data, GBP TRY has still advanced due to concerns about Turkish President Recep Tayyip Erdogan.

Pound Unsettled by Falling National Production Figures

In a pair of negative announcements, the Pound has been forced down against the Lira by poor UK trade balance and output figures.

With the trade result, the -2.12bn deficit recorded in April has expanded to a -3.07bn figure for May.

Highlighting how a weak Pound was not helping UK exporting levels was Samuel Tombs of Pantheon Economics;

‘The main problem remains that exporters have hiked their prices, blunting the boost to competitiveness from the weak pound. Foreign-currency prices for UK goods exports in May were just 5% lower than in Q4 2015.

Exports are earning healthy profits, but few are willing to invest and ramp up production due to Brexit risk. Markit’s survey of export orders also has weakened over the last few months, casting further doubt over the likelihood of a sustained trade boost going forwards’.

Elsewhere, the level of construction, manufacturing and industrial output was shown to have fallen in May.

Responding to this data with a forecast, EY Item Club’s Howard Archer has said;

‘[While] an improved performance from the services sector will provide some support, GDP is likely to have grown by just 0.3% with the risks to that projection skewed to the downside’.

Turkish Lira Fluctuates as Concerns about Erdogan Grow

Although the Turkish Lira recovered a little ground against struggling Sterling on Friday, it remained in the region of a 5-month low.

The latest cause of TRY movement has been the presence of President Erdogan at the G20 summit. With Germany and Turkey having diplomatic spats in recent months, it is possible that the President will be looking to mend fences despite Turkish integration into the EU remaining a distant possibility.

Additionally, Erdogan is expected to meet with Russian President Vladimir Putin. Turkish-Russian relations have been tense ever since a Russian warplane was shot down in late 2015 and Russian Ambassador to Turkey Andrei Karlov was assassinated in late 2016.

UK Wage Data to Drive GBP/TRY

Next week, Pound/Lira exchange rate movement may occur on UK wage data on Wednesday, along with Turkish sales figures on Tuesday.

In the former case, Wednesday will see the UK unemployment rate and earnings figures for May announced, alongside the jobless claims change stat.

The rate of wage growth has been significantly below the rate of inflation for months now, which means that unless wage growth rises sharply, the Pound may slump on further concerns about the national wage squeeze.

Turkish retail sales have been poor in April, posting -0.1% annually and 0.1% on the month. The Lira could appreciate slightly if sales rise, but TRY is more likely to be influenced by political developments over the weekend.

Adam Solomon

Adam joined the team at TorFX soon after graduating from University in 2005 with a degree in Journalism. Since then Adam has advanced to become both Head of Trading and Head of Treasury. His keen interest in the currency market and knowledge of what drives exchange rates makes him perfectly positioned to produce regular market updates focused on the movements of the major currencies.

Contact Adam Solomon