USD/TRY fades the recent weakness, reaches 13.50

• The stability around USD/TRY remains surprising.
• The pair keeps navigating the 13.00-14.00 range so far.
• Turkey’s Consumer Confidence improved to 73.2 in January.

USD/TRY extends the side-lined mood in the mid-13.00s at the end of the week.

USD/TRY calm after the CBRT decision

USD/TRY regains some upside traction and leaves behind two consecutive daily pullbacks on Friday, always against the backdrop of the broad-based consolidative mood within the 13.00-14.00 range in place since the beginning of the new year.

The pair’s consolidative stance appears well in place for yet another session after the Turkish central bank (CBRT) left the One-Week Repo Rate unchanged at 14.00% at its meeting on Thursday, matching the broad consensus.

The last time the CBRT kept the steady hand on rates was at the August 2021 event, which was followed by 500 bps rate cuts in the September (100 bps) , October (200 bps), November (100 bps) and December (100 bps) meetings.

In the domestic calendar, the Consumer Confidence improved to 73.2 for the current month (from 68.9). The higher reading comes after a marked advance in the “Financial situation expectation of household over the next 12 months” and the “General economic situation expectation over the next 12 months”.

What to look for around TRY

The pair keeps the multi-session consolidative theme well in place, always within the 13.00-14.00 range. Higher-than-expected inflation figures released earlier in the year put the lira under extra pressure in combination with some cracks in the confidence among Turks regarding the government’s recently announced plan to promote the de-dollarization of the economy. In the meantime, the reluctance of the CBRT to change the (collision?) course and the omnipresent political pressure to favour lower interest rates in the current context of rampant inflation and (very) negative real interest rates are forecast to keep the domestic currency under intense pressure for the time being.

Eminent issues on the back boiler: Progress (or lack of it) of the government’s new 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. Much-needed structural reforms. Growth outlook vs. progress of the coronavirus pandemic. Potential assistance from the IMF in case another currency crisis re-emerges. Earlier Presidential/Parliamentary elections?

USD/TRY key levels

So far, the pair is advancing 1.01% at 13.4324 and a drop below 12.7523 (2022 low Jan.3) would pave the way for a test of 12.6793 (55-day SMA) and finally 10.2027 (monthly low Dec.23). On the other hand, the next up barrier lines up at 13.9319 (2022 high Jan.10) followed by 18.2582 (all-time high Dec.20) and then 19.0000 (round level).