USD/TRY fails to cheer Turkiye’s supplementary budget approval below 17.00

• USD/TRY picks up bids to mild gains, pares weekly losses.
• Turkish Parliament passes $53 billion supplementary budget to battle inflation.
• Fears of recession escalate as global central banks stay ready for aggressive rate hikes.
• Turkish trade numbers, CBRT Minutes and the US PCE Price Index will be important to watch for fresh impulse.

USD/TRY consolidates weekly losses around 16.67 heading into Thursday’s European session. In doing so, the Turkish lira (TRY) pair ignores the Turkiye’s supplementary budget approval, as well as the US dollar’s pullback, amid inflation and economic slowdown fears.

“Turkiye's parliament approved an 880 billion lira ($52.73 billion) supplementary budget,” Turkish Finance Minister (FinMin) Nureddin Nebati said late on Wednesday per Reuters. Turkish FinMin Nebati also mentioned the objective for such a step as to cover the rising costs of a currency slide, soaring energy prices and rampant inflation.

On a different page, the US Dollar Index (DXY) retreats to 104.99 while snapping a two-day rebound at the highest levels in a fortnight. The greenback’s losses appear linked with the fresh uptick in the US Treasury yields. the US 10-year Treasury yields snap a two-day downtrend as the key bond coupons rebound from the weekly low to 3.10%, up one basis point (bp) by the press time.

Even so, downbeat prints of the US stock futures and fears that the inflation woes will last longer, which in turn could trigger a recession, seem to propel the USD/TRY prices. Recently, the first major US bank to call the recession, namely Deutsche Bank, signaled that the US inflation could keep disappointing the Fed as the policymakers expected a gradual reduction in price pressure.

On Wednesday, the major central bankers’ readiness to battle inflation, even at the cost of short-term economic slowdown. The moves raised concerns over the recession and gain more attention of the USD/TRY traders amid multi-year high Turkish inflation and President Recep Tayyip Erdogan’s rejection of rate hikes.

Moving on, Turkish trade numbers for May and Minutes of the latest Central Bank of Republic of Turkiye (CBRT), when the rates remain unchanged, will be important for the USD/TRY traders. Above all, the US the Core Personal Consumption Expenditure (PCE) Price Index, expected 0.4% MoM versus 0.3% prior, will be an important catalyst to watch for short-term directions.

Technical analysis

Unless providing a daily close below an upward sloping support line from late December 2021, around 16.58 by the press time, USD/TRY remains on the buyer’s radar.