Pound Turkish Lira (GBP/TRY) Exchange Rate Climbs amid Turkish Political Jitters
The Pound Turkish Lira (GBP/TRY) exchange rate is strengthening today as Turkey heads to the ballot this weekend for the presidential election runoffs.
At the time of writing, GBP/TRY is trading at around ₺24.727, up over 1% on the day.
Turkish Lira (TRY) Slips Ahead of Presidential Showdown
The Turkish Lira (TRY) is weakening today ahead of the second round of the Turkish presidential election this weekend.
President Recep Tayyip Erdoğan is in the lead, having secured 49.5% of the vote, versus his rival Kemal Kılıçdaroğlu who secured 44.9%. In addition, an ultra-nationalist candidate who came third with 5.2% has thrown his weight behind Erdoğan, increasing the likelihood that the existing president will be elected for a third decade of rule.
During his presidency, Erdoğan has eroded the independence of the Central Bank of the Republic of Türkiye (CRT), ordering the bank to slash interest rates against the advice of most economists. This saw inflation rocket to a 24-year high of 85% while the Turkish Lira crashed to a record low.
TRY investors are anxious that, if he is re-elected, Erdoğan’s stranglehold on power and his unorthodox approach to monetary policy could spell more trouble for the Turkish economy.
Furthermore, the close voting split between the two candidates demonstrates how polarised the country is. Fears of civil unrest and political instability are also weighing on the Lira.
Pound (GBP) Firms as Sales Recover
Meanwhile, the Pound (GBP) is finding support this morning following upbeat UK retail sales data. Domestic British sales recovered 0.5% in April, versus forecasts of 0.3% growth.
However, the previous month’s figure was revised from -0.9% to -1.2%, capping Sterling’s upside.
Bank of England (BoE) interest rate rise bets also boosted the Pound. Since the UK consumer price index exceeded forecasts on Wednesday, with core inflation unexpectedly jumping to a 31-year high, markets have been pricing in multiple further rate rises from the British central bank.
GBP/TRY Exchange Rate Forecast: Turkish Lira to Hit New Lows?
Next week could see volatility in the GBP/TRY exchange rate as Turkey counts the ballots from the presidential election. As the votes come in, the Lira could waver.
In the wake of the election, we could potentially see the Lira drop to fresh record lows. Concerns about the economic impact of another term under Erdoğan paired with widespread civil unrest could see TRY exchange rates crash.
However, if the presidential victory is undisputed and the country avoids political turmoil, the Lira could stabilise.