Turkish Lira Crashes over 2% against the Pound as US Dollar Surges

Lira Crashes over 2% against the Pound as US Dollar Surges

UPDATE: The Turkish Lira has fallen by more than 2% against Sterling today as the US Dollar powers ahead on the back of spiking bond yields and positive date.

This latest devaluation comes after a large jump in inflation was revealed yesterday and will further undermine investor confidence in the currency.

Soaring Turkish Inflation Enables GBP/TRY Exchange Rate Rise

Pound Sterling (GBP) has risen by 1% against the Turkish Lira (TRY) today, following news of Turkish inflation growth in September.

The rate of Turkish price growth has jumped from 17.9% to 24.52% on the year, while on the month an increase from 2.3% to 6.3% has been seen.

This is the highest level of inflation in 15 years; both inflation increases have been above forecast levels and are a symptom of the Turkish Lira crashing in August 2018.

The Turkish Central Bank (TCMB) hiked interest rates from 17.75% to 24% in mid-September, but today’s inflation figures suggest that there hasn’t been an immediate impact on prices.

The worry is that inflation in Turkey will continue to increase in the coming months, which will put more pressure on consumers and increase economic instability.

Pound Sterling to Lira (GBP/TRY) Exchange Rate Rises despite Falling Services PMI

In domestic news, today’s Pound to Lira (GBP/TRY) exchange rate gains have been limited by the news that UK services sector activity slowed in September.

The monthly PMI reading fell from 54.3 points to 53.9, below the anticipated 54 point level.

This reading still means that the sector is growing, but at a reduced rate. Commenting on the disappointing data, IHS Markit Chief Business Economist Chris Williamson said:

‘Brexit worries continue to dominate the outlook, keeping business optimism firmly anchored at levels which would normally be indicative of an imminent slowdown.

‘Clarity on Brexit arrangements is therefore needed as soon as possible to help sustain growth.’

Pound to Turkish Lira Forecast: Will GBP/TRY Exchange Rate Rise on UK GDP Growth?

The next high-impact UK data to watch out for isn’t due until 10 October, when UK GDP and output data will be released.

Readings for August are expected to show accelerating monthly GDP growth, but a slowdown in annual construction output.

The other production figures, covering industrial and manufacturing output, are tipped to rise – the Pound could ultimately advance against the Lira on next Wednesday’s news.

Turkey’s next major data release is further off, consisting of July’s unemployment rate reading on 15 October.

This is expected to show higher unemployment with a shift from 10.2% to 10.7%; such a result could erode TRY trader confidence and enable a clear GBP/TRY exchange rate rise.

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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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