Strong Turkish Consumer Confidence Shores up Turkish Lira (TRY) Exchange Rates
The mood towards the Turkish Lira (TRY) improved this morning in the wake of a solid uptick in November’s consumer confidence index.
As the headline index strengthened from 57.3 to 59.6 this encouraged a greater sense of optimism in the outlook for the Turkish economy.
While markets still expect to see Turkey enter a state of recession in the fourth quarter the positive confidence data helped to give TRY exchange rates a lift.
Comments from Turkish finance minister Berat Albayrak also lent support to the Turkish Lira this week, as he indicated a belief that inflation will continue to fall in the months ahead.
Although investors still take Albaryak’s assessment with a pinch of salt, the prospect of lower inflation was enough to encourage the Lira, in the short term at least.
Brexit Developments Boost Pound Sterling (GBP) Exchange Rates
Even though doubts remain over the future of Theresa May’s proposed Brexit deal this was not enough to prevent Pound Sterling (GBP) from recovering ground today.
While MPs across the political spectrum still oppose the deal for a variety of reasons, this sense of uncertainty was eclipsed by the latest developments in Brussels.
As the UK and EU agreed a more substantial declaration on their future relationship GBP exchange rates rallied sharply across the board.
This gave the Pound Sterling to Turkish Lira (GBP/TRY) exchange rate a boost, even though the expanded text is not a guarantee of an imminent finalised agreement.
GBP/TRY Exchange Rate Remains Vulnerable to UK Political Uncertainty
The GBP/TRY exchange rate could struggle to hold onto its stronger footing for long, however, if signs continue to point towards the Brexit deal facing defeat in Parliament.
If MPs choose to vote against the deal this would significantly increase the risk of the UK leaving the EU in March without any agreement in place, to the detriment of the Pound.
Unless today’s expanded declaration musters up support for May’s deal the Pound will remain vulnerable to downside pressure in the days ahead.
As long as investors see reason to bet on the UK and EU resolving the issue of Brexit, though, the downside potential of GBP exchange rates should ease.
Improved Business Confidence to Add to Turkish Lira (TRY) Support
Demand for the Turkish Lira may pick up further next week if November’s business confidence shows a similar improvement on the month.
Further evidence of strengthening domestic sentiment is likely to encourage investors to favour the Lira, even though doubts over the economic outlook remain.
Even so, TRY exchange rates remain vulnerable to any fresh escalation in global trade tensions, which could encourage more risk averse trading.
However, if the Federal Reserve continues to show signs of taking a more gradual approach to monetary tightening next year a softer US Dollar (USD) could offer support to the Turkish Lira.