Pound Sterling to Turkish Lira (GBP/TRY) Exchange Rate Pushes Higher as Risk Aversion Persists

Pound Sterling Turkish Lira (GBP/TRY) Exchange Rate Benefits From Trade Jitters

With market risk appetite deteriorating once again the Pound Sterling to Turkish Lira (GBP/TRY) exchange rate was encouraged to return to a stronger footing.

Confidence in the Turkish Lira (TRY) remains generally lacking thanks to the entrenched positions of both the Turkish and US administrations.

As the two countries remain in a state of political deadlock the economic pressure on Turkey is unlikely to let up any time soon, even though the initial market panic has shown signs of easing.

In the absence of any breakthrough in tensions investors still see little incentive to buy into the weakened Lira this week.

The latest escalation in trade tensions between the US and China also weighed on the risk-sensitive Turkish Lira, with the protectionist outlook of the Trump administration continuing to harden.

Better-Than-Forecast UK Retail Sales Bolster GBP/TRY Exchange Rate

An unexpected improvement in the CBI reported retail sales index for August offered the Pound Sterling to Turkish Lira (GBP/TRY) exchange rate an extra boost.

Markets were caught off guard as the headline index surged from 20 to 29 on the month, defying forecasts of a dip to 13.

This indicates that consumers continued to spend in August thanks to the lingering summer heatwave, raising hopes for a stronger third quarter of economic growth.

However, the outlook for the retail sector remains muted, with Anna Leach, CBI Head of Economic Intelligence, noting:

‘The long-term challenges facing the retail sector are significant and won’t be resolved overnight. Subdued real wage growth and digital disruption continue to pile pressure on firms, while high street retailers continue to suffer under an out-dated business rates system.’

Pound Sterling Turkish Lira (GBP/TRY) Exchange Rate Vulnerable to Consumer Credit Decline

Looking ahead to next week, the Pound Sterling to Turkish Lira (GBP/TRY) exchange rate could find fresh support on the back of the latest UK consumer credit and mortgage approvals data.

Any signs of greater confidence within the UK economy could encourage the Pound to strengthen against its rivals, even in the face of continued Brexit uncertainty.

While higher levels of consumer credit could pose a risk to overstretched UK households any decline in consumer borrowing would bode ill for the wider economic outlook.

As consumer spending has helped to drive domestic growth in the wake of the Brexit vote a weaker showing here may weigh heavily on GBP exchange rates.

If consumer confidence shows further signs of diminishing Pound Sterling is likely to come under additional pressure.

Weaker Turkish Confidence Indexes to Offer Additional Boost to GBP/TRY Exchange Rate

As the unfolding financial crisis continues to cast a shadow over the Turkish economy in the days ahead the Pound Sterling to Turkish Lira (GBP/TRY) exchange rate looks set to hold onto its stronger footing.

Until markets see evidence that economic conditions in Turkey are improving the mood towards the Turkish Lira is likely to remain bearish.

Domestic data may not be enough to outweigh the persistent market malaise, especially if August’s business confidence and economic confidence indexes reflect the recent jitters.

Focus will also fall on July’s Turkish trade balance figure, with a widening of the trade deficit likely to put a fresh dent in TRY exchange rates on Wednesday.

Politics and trade worries are still expected to dominate the outlook of the Pound Sterling to Turkish Lira (GBP/TRY) exchange rate for some time to come, however.

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Hannah Wilson

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