USD/TRY: Upside remains capped by 18.6000

• USD/TRY extends the side-lined trading below 18.60.
• Türkiye’s End Year CPI Forecast came at 67.78%.
• The CBRT is expected to cut the policy rate next week.

USD/TRY keeps the range bound theme well in place for yet another session on Friday.

USD/TRY now shifts the focus to the CBRT

No changes to the snail-paced depreciation of the Turkish currency, as USD/TRY remains stuck within the multi-session consolidative theme just below the 18.60 region.

The current recovery of the greenback keeps the upside pressure around the pair unchanged, while the relentless exodus from the lira also continues to play its part in the ongoing price action.

In the meantime, investors are expected to shift their attention to the CBRT meeting next week, when the central bank is seen reducing further the One-Week Repo Rate (likely by another 100 bps) amidst the “Türkiye Economic Model”, aimed at boosting exports, production and investment to achieve a current account deficit, all via lower rates.

In the domestic calendar, the End Year CPI Forecast was revised marginally up to 67.78% (from 67.73%).

What to look for around TRY

USD/TRY keeps navigating the area of all-time highs near 18.60 amidst the combination of omnipresent lira weakness and bouts of strength in the dollar.

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 the last three months), real interest rates remain entrenched well in negative territory and the omnipresent political pressure to keep the CBRT biased towards a low-interest-rates policy.

In addition, the lira is poised to keep suffering against the backdrop of Ankara’s plans to prioritize growth and shift the current account deficit into surplus following a lower-interest-rate recipe.

Key events in Türkiye this week: End Year CPI Forecast (Friday).

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 0.32% at 18.5872 and faces the next hurdle at 18.5980 (all-time high October 11) followed by 19.00 (round level). On the downside, a break below 18.2082 (55-day SMA) would expose 17.8590 (weekly low August 17) and finally 17.7586 (monthly low).