USD/TRY rises to a new all-time high around 18.40 post-CBRT

• USD/TRY prints new record peak around 18.40 on Thursday.
• The CBRT reduced the One-Week Repo Rate by 100 bps.
• Türkiye Consumer Confidence improved in September.

Further weakness in the Turkish lira motivated USD/TRY to advance to new all-time highs near the 18.40 yardstick on Thursday.

USD/TRY stronger post-CBRT

USD/TRY trades in the positive territory since Monday and has accentuated the upside on Thursday after the Turkish central bank (CBRT) once again surprised markets and reduced the One-Week Repo Rate by a full point to 12.00%.

In its statement, the CBRT sees the probability of a slowdown in the third quarter in response to the loss of momentum in foreign demand and reiterated that the elevated inflation is bolstered by geopolitical tensions resulting in higher energy costs, price formation that goes in contrast with economic fundamentals and higher food and commodity prices.

The CBRT keeps the medium term inflation target at 5%.

Other than the CBRT meeting, Türkiye’s Consumer Confidence improved slightly to 72.40 in September (from 72.20).

What to look for around TRY

USD/TRY picks up extra pace following another unexpected interest rate cut by the CBRT and flirts with the 18.40 region ono Thursday.

So far, price action around the Turkish lira is expected to keep gyrating around the performance of energy and commodity prices - which are directly correlated to developments from the war in Ukraine - the broad risk appetite trends and the Fed’s rate path in the next months.

Extra risks facing the Turkish currency also come from the domestic backyard, as inflation gives no signs of abating (despite rising less than forecast in July and August), real interest rates remain entrenched well in negative territory and the political pressure to keep the CBRT biased towards low interest rates remains omnipresent.

In addition, the lira is poised to keep suffering against the backdrop of Ankara’s plans to prioritize growth (via higher exports and tourism revenue) and the improvement in the current account.

Key events in Türkiye this week: Consumer Confidence, CBRT Interest Rate decision (Thursday).

Eminent issues on the back boiler: FX intervention by the CBRT. Progress of the government’s 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. Presidential/Parliamentary elections in June 23.

USD/TRY key levels

So far, the pair is gaining 0.34% at 18.3807 and faces the next hurdle at 18.3995 (all-time high September 22) seconded by 19.00 (round level). On the downside, a break below 17.9396 (55-day SMA) would expose 17.8590 (weekly low August 17) and finally 17.7586 (monthly low