Pound Turkish Lira (GBP/TRY) Exchange Rate Takes a Hit as Turkey Surprises with Rate Hike

Quiet UK Data Day Leaves Little to Support Pound Turkish Lira (GBP/TRY) Exchange Rate

The Pound Turkish Lira (GBP/TRY) exchange rate was trading poorly on Wednesday, encumbered by a lack of UK ecostats and fresh news that Turkey’s central bank decided to raise one of its key interest rates.

Today’s empty UK data calendar left markets to focus on recent upbeat UK government borrowing figures and the latest headlines regarding Brexit – with UK Brexit Secretary David Davis claiming that the UK will be able to sign trade deals with other nations during the transition period, but not implement them.

Mr Davis also said that he expects Parliament to uphold the government’s policy on leaving the customs union once the Brexit transition period has ceased, regardless of the results of the non-binding MP vote on Thursday.

The elephant in the room remains the issue of the Irish border, however, with markets still slightly anxious that a solution will not be agreed upon and that a cliff-edge Brexit – and all the uncertainty that it could entail – might still occur.

This outlook assisted in weighing on the GBP/TRY exchange rate.

Turkey’s Central Bank Raises Top Interest Rate by 75 Basis Points – Turkish Lira (TRY) Exchange Rates Climb

Turkish Lira (TRY) exchange rates surged on Wednesday, gaining on news that Turkey’s central bank raised one of its four interest rates used to set policy by 75 basis points.

The rate itself was the late liquidity window (the rate used to set bank funding costs) which was pushed up to 13.5%.

This was Turkey’s first rate hike in four months and served to better contain high levels of inflation in the weeks leading up to the Presidential election in June, particularly with consumer price growth pushing as high as 13% last year.

This reading, whilst above-forecast, was not entirely unexpected, however, given that Deputy Prime Minister Mehmet Simsek asserted last week that bringing inflation down to single-digit levels is a key government priority.

The next data print liable to knock the Lira will be Friday’s economic confidence index (April), but whether the forecast rise from 100.2 to 102.6 will be enough to keep the GBP/TRY exchange rate in Turkey’s favour remains to be seen.

Pound Turkish Lira (GPB/TRY) Exchange Rate Forecast: UK GDP in the Spotlight

The Pound Turkish Lira (GBP/TRY) exchange rate could encounter volatility on Friday as markets respond to the UK’s latest GDP readings and a speech from BoE Governor Mark Carney.

Analysts currently expect the Q1 2018 GDP estimate to print at 1.5%, up from the previous period’s score of 1.4%.

Meanwhile the quarterly reading is expected to hold at 0.4%.

The primary concern, however, is that the recent severe weather – which crippled the UK’s services sector – could have hit growth during this period.

Beyond this, markets will be looking to assess BoE’s chief Mark Carney’s latest comments, with any indication that a rate hike will be occurring in May capable of propelling the GBP/TRY exchange rate higher.

John Cameron

John studied economics at Cambridge University and later became an MSTA qualified Technical Analyst. He began working for TorFX almost a decade ago and now holds a Senior Account Manager position. As well as lending his clients support and guidance, John has produced market commentary and detailed exchange rate analysis for a number of online publications.

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