Turkey’s Central Bank Unleashes Emergency Measures: Pound Turkish Lira (GBP/TRY) Exchange Rate Drops -2.5% as Emerging Market Volatility Continues

GBP/TRY Exchange Rate Remains near Historic High despite Lira Trader Confidence

Pound Sterling (GBP) has fallen by -2.5% against the Turkish Lira (TRY) today, at a time of returning demand for the volatile Turkish currency.

The Pound is still hitting an interbank exchange rate of TRY8.54 despite the decline, which leaves the GBP/TRY exchange rate near its all-time highest level of TRY8.93.

UK economic data has been limited today – GfK’s August consumer confidence reading has shifted from -10 points to -7, but pessimistic consumers are still in the majority.

Turkish Central Bank’s Emergency Measures Rally Turkish Lira to Pound Trading

The Lira (TRY) remains an extremely unstable currency, but has managed to advance against the Pound (GBP) today because of emergency action from the Turkish central bank (TCMB).

The TCMB has been central to the Turkish Lira crisis as its independence is thought to be threatened by President Recep Tayyip Erdogan.

Mr Erdogan has strongly opposed raising interest rates to reduce Turkish inflation and this apparent financial mismanagement has panicked TRY traders and sent the Lira into a nosedive.

Following the resignation of TCMB Deputy Governor Erkan Kilimci, policymakers have rushed to shore up confidence by reducing withholding tax levels on Lira deposits in banks.

This action has at least temporarily restored confidence among Lira traders, although in the bigger picture the Pound to Lira exchange rate is still extremely favourable because of the recent turmoil, with the Turkish Lira having almost halved in value against the Pound over the last year.

Pound Sterling to Turkish Lira Exchange Rate Forecast: Are GBP/TRY Exchange Rate Gains ahead on Turkish Inflation Boom?

The Pound (GBP) could bounce back again against the Turkish Lira (TRY) in the week ahead, when high-impact Turkish inflation rate data comes out on Monday morning.

This is predicted to show a faster pace of price growth during August, which might panic Lira traders and enable an easy GBP/TRY exchange rate rise.

Month-on-month Turkish inflation is expected to rise from 0.55% to 2.23%, while an annual increase from 15.85% to 17.1% has also been forecast.

Forecast-matching results would show that Turkey is unlikely to see off eye-watering inflation anytime soon, so the Lira could tumble on such news.

A Pound to Lira exchange rate rise on Monday might be jeopardised by the UK manufacturing PMI, however, as this is predicted to slow from 54 points to 53.8.

This result would mean a slower pace of sector growth during August and could limit GBP/TRY exchange rate gains on Monday.

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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.

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