USD/TRY climbs to new 2022 peaks near 16.50 on steady CBRT

• USD/TRY extends the move higher to 16.50.
• Turkey Economic Confidence Index improved to 96.70 in May.
• The CBRT kept the policy rate unchanged at 14.00%.

The Turkish lira extends the bearish mood and now pushes USD/TRY to fresh 2022 highs near the 16.50 level on Thursday.

USD/TRY stronger post-CBRT

USD/TRY keeps the march north unabated for the fourth consecutive session on Thursday. This time, the negative performance of the lira appears propped up by another “hold” by the Turkish central bank (CBRT) at its event earlier on Thursday.

Indeed, the CBRT kept the One-Week Repo Rate intact at 14.00%, paying little-to-none attention to the rampant inflation that hit a 2-decade high in April at nearly 70% vs. the same month of 2021.

Once again, in its statement, the CBRT blames higher energy and commodity prices as well as supply shocks all stemming from the geopolitical landscape for the upside pressure in the domestic inflation, while it keeps unchanged the medium-term inflation goal at 5% amidst the ongoing “liraization strategy” (or whatever that means).

In the domestic calendar, the Economic Confidence Index improved to 96.70 in May (from 94.70).

What to look for around TRY

USD/TRY keeps the upside bias well and sound and trades beyond the 16.00 yardstick for the first time since late December 2021.

So far, price action in the Turkish currency is expected to gyrate around the performance of energy prices, the broad risk appetite trends, the Fed’s rate path and the developments from the war in Ukraine.

Extra risks facing TRY also come from the domestic backyard, as inflation gives no signs of abating, real interest rates remain entrenched in negative figures and the political pressure to keep the CBRT biased towards low interest rates remain omnipresent.

Key events in Turkey this week: Economic Confidence Index, CBRT Interest Rate Decision (Thursday).

Eminent issues on the back boiler: FX intervention by the CBRT. Progress (or lack of it) of the government’s new scheme oriented to support the lira via protected time deposits. Constant government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Structural reforms. Upcoming Presidential/Parliamentary elections.

USD/TRY key levels

So far, the pair is gaining 0.55% at 16.4053 and is expected to meet the next hurdle at 16.4554 (2022 high May 26) seconded by 18.2582 (all-time high December 20) and then 19.00 (round level). On the other and, a breach of 14.6836 (monthly low May 4) would expose 14.5458 (monthly low April 12) and finally 14.5136 (weekly low March 29).