USD/TRY oversteps 18.20, the spotlight is on US NFP

• USD/TRY has crossed the immediate hurdle of 18.20 as the focus shifts to US NFP.
• Fed’s Powell already warned of softening labor market ahead due to higher interest rates.
• Improved forecast for the Turkish current account deficit may bring short-term weakness for Turkish lira bulls.

The USD/TRY pair has given an upside break of the consolidation formed in a narrow range of 18.17-18.20 in the early European session. On a broader note, the asset has remained sideways after facing barricades above 18.22. For a decisive move, investors are awaiting the release of the US Nonfarm Payrolls (NFP) data.

According to the preliminary estimates, the US economy generated 300k jobs in August, lower than the prior release of 528k in July. As the US economy is operating at full-employment levels, room for more employment generation has squeezed significantly. The investing community is aware of the fact that Federal Reserve (Fed) chair Jerome Powell has already warned about softening of labor market while addressing the world economy at the Jackson Hole Economic Symposium.

In order to fix the inflation mess, the growth prospects in the US economy have to make some sacrifices. Bringing price stability to the economy is the foremost priority of the Fed, which could be achieved by squeezing cheap money from the market. Therefore, a decline in the job creation process cannot be ruled out. Apart from the US NFP, the Unemployment Rate is seen as stable at 3.5%.

On the Turkiye lira front, Goldman Sachs has raised its forecast for Turkey's 2022 GDP growth to 5.5% from 3.5% for CY2022. However, the research agency has increased its current deficit forecast to $45 billion from $36 billion. A higher forecast for the current account deficit may bring a short-term weakness for the Turkiye lira bulls.

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