Pound Turkish Lira (GBP/TRY) Exchange Rate Trades at Three-Month Low after $5bn Saudi Cash Injection

Pound Turkish Lira Exchange Rate Holds at Three-Month Low

The Pound Turkish Lira (GBP/TRY) exchange rate trades at a three-month low this morning after plummeting 1% on Tuesday.

At the time of writing the GBP/TRY exchange rate is trading at around TRY22.4209. Virtually unchanged from this morning’s opening rate.

Turkish Lira (TRY) Supported by $5bn Saudi Deposit in Turkey’s Central Bank

The Turkish Lira (TRY) is currently up on the week, after steps by Saudi Arabia to shore up the long ailing currency.

The Saudi Fund for Development announced on Monday it has deposited $5bn into Turkey’s central bank.

A statement from the fund said the deposit is ‘a demonstration of the Kingdom of Saudi Arabia’s commitment to supporting Turkey’s efforts to strengthen its economy’.

The value of the Turkish Lira has fallen dramatically in recent years. The GBP/TRY exchange rate appreciated by over 300% over the past five years. The Lira is also currently hovering near record lows against the US Dollar (USD).

The Lira’s woes can be traced to years of intervention by Turkish President Recep Tayyip Erdogan into the Central Bank of the Republic of Turkey’s (CBRT) monetary policy. Erdogan has resisted attempts to raise interest rates, despite domestic inflation running at 55%.

It’s hoped the Saudi cash injection will also help to support Turkey’s economy through the earthquake which devastated the country in February.

Pound (GBP) Muted amid Perceived Fed-BoE Rate Divergence

The Pound (GBP) trades sideways this morning after plummeting on Tuesday as Federal Reserve Chair Jerome Powell stunned markets with particularly hawkish comments.

Powell signalled the Fed is likely to accelerate the pace of its interest rate hikes in a testimony in front of congress. The odds of a 50bps rate hike in March rocketed to 70% in the hours following his comments.

Powell’s comments have raised fresh concerns of potential policy divergence between the Fed and Bank of England (BoE). The prospect of higher US interest rates comes at a time when the BoE has hinted UK interest rates may have peaked.

This triggered a sharp Sterling selloff on Tuesday. The Pound plunged as much as 1% against some of its peers including the Turkish Lira.

In the absence of any notable data and lack of market moving headlines, this leaves the GBP/TRY exchange rate to languish at a three-month low this morning.

Pound Turkish Lira Exchange Rate Forecast: Sterling to Recover on Upbeat GDP Figures?

Turning to the second half of the week, the Pound Turkish Lira (GBP/TRY) exchange rate has the potential to rebound with the publication of the UK’s latest GDP figures.

January’s monthly growth figures are forecast to report the UK economy expanded by 0.1%, following a 0.5% decline in December. The rebound in growth is likely to ease recession fears and bolster the Pound.

Meanwhile, Turkey’s latest jobs report could weigh on the Lira at the end of the week. Analysts forecast unemployment will have ticked higher at the start of the year.

Matthew Andrews

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