USD/TRY sticks to its consolidation range around 13.60

• USD/TRY keeps the broad range bound theme unchanged.
• Turkey’s 10y bond yields drop to multi-day lows near 21%.
• End Year CPI Forecast, Unemployment Rate next of note in the docket.

The Turkish lira depreciates at the beginning of the week and lifts USD/TRY to the 13.60 region.

USD/TRY remains largely within a consolidation mode

USD/TRY resumes the upside and leaves behind Friday’s small dip amidst the tepid recovery in the greenback and alternating risk appetite trends, as traders continue to adjust to the latest US Nonfarm Payrolls figures.

The domestic currency adds to recent losses, particularly after inflation figures in Turkey showed consumer prices rising more than 48% in the year to January, the highest level since April 2002.

On the latter, finmin N.Nebati sees (hopes?) inflation peaking in April and to start a decline to a single-digit print by June 2023. Nebati’s view (wish) of the CPI not hitting 50% will surely be put to the test in the upcoming months, however.

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. While skepticism keeps running high over the effectiveness of the ongoing scheme to promote the de-dollarization of the economy – thus supporting the inflows into the lira - 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 a sure recipe to keep the domestic currency under pressure for the time being.

Key events in Turkey this week: Unemployment Rate (Thursday) - End Year CPI Forecast, Current Account, Industrial Production, Retail Sales (Friday).

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. Earlier Presidential/Parliamentary elections?

USD/TRY key levels

So far, the pair is advancing 0.50% at 13.5752 and a drop below 13.3054 (55-day SMA) would expose 13.2327 (monthly low Feb.1) and finally 12.7523 (2022 low Jan.3). 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).