USD/TRY in 2022 highs: Bulls remain well in charge in May

• USD/TRY prints new 2022 highs north of 16.00 on Tuesday.
• Turkey 10y bond yields rose to the boundaries of 25.00%.
• The CBRT is expected to leave the policy rate unchanged.

Further weakness in the Turkish currency lifts USD/TRY to new YTD highs past the 16.00 barrier on Tuesday.

USD/TRY weaker ahead of CBRT

USD/TRY advances for the third session in a row and finally manages to leave behind the 16.00 hurdle on Tuesday despite the persistent offered stance in the greenback.

The lira, in the meantime, continues to suffer the omnipresent geopolitical tensions stemming from the war in Ukraine and its associated energy crisis, while rising speculation of a global slowdown seems to have already started to weigh on the currency.

In addition, inflation concerns appear unabated and were particularly exacerbated after the monthly survey by the Turkish central bank (CBRT) on Monday now sees inflation around 58% by year end.

Investors’ attention, in the meantime, slowly shifts to the CBRT’s event on Thursday and whether the bank will finally start hiking rates to tame the rampant inflation.

What to look for around TRY

USD/TRY keeps the upside bias well and sound and trades beyond the 16.00 yardstick for the first time since late December 2021.

So far, price action in the Turkish currency is expected to gyrate around the performance of energy prices, the broad risk appetite trends, the Fed’s rate path and the developments from the war in Ukraine.

Extra risks facing TRY also come from the domestic backyard, as inflation gives no signs of abating, real interest rates remain entrenched in negative figures and the political pressure to keep the CBRT biased towards low interest rates remain omnipresent.

Key events in Turkey this week: Economic Confidence Index, CBRT Interest Rate Decision (Thursday).

Eminent issues on the back boiler: FX intervention by the CBRT. 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. Structural reforms. Upcoming Presidential/Parliamentary elections.

USD/TRY key levels

So far, the pair is gaining 0.80% at 16.0484 and is expected to meet the next hurdle at 16.1533 (2022 high May 24) seconded by 18.2582 (all-time high December 20) and then 19.00 (round level). On the other and, a breach of 14.6836 (monthly low May 4) would expose 14.5458 (monthly low April 12) and finally 14.5136 (weekly low March 29).