USD/TRY ignores CBRT move above 18.00, Turkish GDP, US ADP employment data eyed

• USD/TRY remains firmer around yearly top, up for the third consecutive day.
• CBRT raises forex to TRY conversion requirements for banks.
• Cautious mood restricts USD gains ahead of the key data.
• Turkish economy expected to grow by 7.5% in Q2, likely marking contraction in H2.

USD/TRY picks up bids to defend buyers around 18.20 heading into Wednesday’s European session. In doing so, the Turkish lira (TRY) fails to respect the Central Bank of the Republic of Türkiye (CBRT) action, as well as a softer US dollar, ahead of important statistics from Ankara and Washington.

“Turkey's central bank raised the minimum percentage of foreign exchange deposits that banks need to convert to Turkish liras, the Official Gazette showed on Wednesday, while hiking the forex required reserve ratios for those that remain below the limit,” reported Reuters. The news also mentioned that the minimum conversion limit will also be imposed on corporate accounts, from only individual accounts previously.

On the other hand, the US Dollar Index (DXY) bears the burden of the market’s indecision, or cautious optimism, as traders wait for the US employment numbers. That said, the greenback’s gauge versus the six major currencies drop 0.21% intraday to 108.60 by the press time.

It’s worth noting that firmer China PMI and hopes of more stimulus seem to have underpinned the cautious optimism of late. While portraying the mood, S&P 500 Futures refresh intraday high near 4,014, up 0.65% on a day by the press time. Also suggesting an absence of the risk-off mood is the steady US 10-year Treasury yields of around 3.11%, after rising to the two-month high the previous day.

Looking forward, Turkiye’s second quarter (Q2) Gross Domestic Product (GDP), expected 7.5% versus 7.3% prior, could offer immediate directions to the USD/TRY moves ahead of the US ADP Employment Change for August, the early signal for Friday’s Nonfarm Payrolls (NFP), expected 200K versus 128K prior.

Ahead of the Turkish GDP announcements, the Reuters poll challenges the optimism of the TRY traders by signaling a contraction of activities during the second half (H2) of 2022. The poll also quotes Turkish Finance Minister Nureddin Nebati who said on Tuesday that he expects growth in the second quarter to come in higher than the 7.3% recorded in the first quarter.

Technical analysis

Although RSI signals that the USD/TRY bulls are running out of steam, a three-week-old horizontal support area near the 18.00 threshold restricts the short-term downside of the pair. Meanwhile, the quote’s further upside momentum aims 2021 peak near 18.35.