USD/TRY stays pressured towards $13.00 as Turkish Presi. Erdogan vows to tame inflation

• USD/TRY remains depressed around weekly low after dropping the most since December 23.
• Turkey’s Erdogan hopes to see benefits of the latest policy measures in summer.
• US dollar slumped as CPI matched forecasts, hawkish Fedspeak restricts immediate downside.
• Turkish Industrial Production, US PPI and Fed policymakers’ speeches will be crucial for intraday direction.

USD/TRY remains on the back foot around $13.20, fails to keep early Asian bounce off weekly low during Thursday’s Asian session.

The Turkish lira (TRY) pair dropped the most since late December the previous day after the US dollar slumped despite 40-year high inflation figures, as well as hawkish Fedspeak.

The reason could be linked to the actual figures matching the forecasts, at 7.0% in December.

Following the US inflation data, Federal Reserve Bank of St. Louis President James Bullard said, per Wall Street Journal (WSJ), “Four rate hikes in 2022 now appear to be on the table and, in the face of high inflation, a rate hike in March seems likely.” On the same line were comments from the member of the Fed Board of Governors and incoming Vice Chairman of the FOMC Lael Brainard who said, “Inflation control is Fed's most important task. Additionally, President and CEO of the Federal Reserve Bank of San Francisco Mary Daly signaled a rate hike as early as March.

At home, Turkish President Recep Tayyip Erdogan promised on Wednesday to tame Turkey's surging inflation, per Reuters. The news also mentioned Erdogan saying, "The swelling inflation is not in line with the realities of our country," while also adding that the government's measures would soon soften the burden of "unjust" price hikes. Additional comments from Erdogan were like routine statements as, “Turkey will bring prices down as soon as possible,” as well as “Hopes to see benefits of economic policy in summer months.”

Against this backdrop, the US Treasury yields improve following the hawkish Fedspeak and the S&P 500 Futures also fail to extend the previous day’s gains amid mixed sentiment.

Looking forward, Turkey’s Industrial Production for November, prior 8.5% YoY, will act as an immediate catalyst for USD/TRY prices whereas US Producer Price Index (PPI) for December and weekly jobless claims will join the Fedspeak will entertain pair traders afterward.

Technical analysis

21-DMA around $13.20 tests the USD/TRY bears cheering a clear downside break of the 10-DMA, near $13.52 at the latest. Also acting as the nearby support is a 50-DMA level of $12.58. It’s worth noting that the quote’s rally past $13.52 isn’t a sure call for the buyers as the $14.00 threshold has been restricting the pair’s upside of late.