Pound Turkish Lira (GBP/TRY) Exchange Rate Rises after UK Inflation Beats Forecasts

Pound Turkish Lira (GBP/TRY) Exchange Rate Strong as Markets Bet on BoE Hike

The Pound Turkish Lira (GBP/TRY) exchange rate strengthened this morning, hitting a one-week high, after UK inflation boosted Bank of England (BoE) interest rate hike bets.

Meanwhile, the Turkish Lira (TRY) struggles close to record lows as inflation remains near 60% despite huge interest rate hikes from the Central Bank of the Republic of Türkiye (CBRT).

At the time of writing, the GBP/TRY exchange rate is trading at around ₺34.1775, up 0.4% on the day.

Pound (GBP) Buoyed by Hotter UK Inflation

The Pound (GBP) ticked higher against the Turkish Lira this morning after the UK’s latest consumer price index exceeded forecasts.

Headline inflation in the UK held steady at 6.7% in September, rather than easing to 6.6%. Meanwhile, core inflation cooled less than expected, edging down from 6.2% to 6.1%, rather than 6%.

The figures are likely to cause concern among policymakers at the BoE. Although UK inflation has fallen significantly from its 41-year high of 11.1% hit last October, disinflation seems to have stalled over the past three months.

Today’s CPI may prompt the Bank of England to pursue another interest rate hike at its policy meeting at the start of November. Rate hike bets are lending Sterling support today.

Turkish Lira (TRY) Remains Weak despite Recent Rate Hikes

Meanwhile, the Turkish Lira remains on the ropes, having hit a fresh record low against the US Dollar (USD) and a one-week low against the Pound.

Since undergoing an ‘intentional devaluation’ as Turkey unwound measures to prop up its currency, the Lira has failed to stage a recovery.

Despite the Turkish central bank having raised interest rates from 8.5% to 30% over four meetings, the Lira remains near record lows and inflation has risen back above 60%, having initially eased to an 18-month low of 38.2% back in June.

While economists believe Turkey’s economic, fiscal and monetary policy are all now heading in the right direction, they also say it will take time until the outlook begins to improve.

In the meantime, there are concerns that President Recep Tayyip Erdoğan may abandon his shift to orthodox economy policy before it has a chance to take effect.

GBP/TRY Exchange Rate Forecast: CBRT to Hold or Hike?

Later this week, Sterling could relinquish some of its gains on Friday as economists expect new data to show a 0.2% decline in UK retail sales last month. Such a result could raise fears about the British economy, thereby denting GBP’s appeal.

Looking further ahead, next week brings the latest interest rate decision from the CBRT. At the time of writing, some forecasters expect the Turkish central bank to leave interest rates unchanged at 30%. However, there is no consensus forecast available.

If the bank does hold rates, the Lira could drop to new record lows. Conversely, another strong rate rise from the CBRT could help TRY regain ground.

Samuel Birnie

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