USD/TRY dribbles around 16.50 as Turkish President Erdogan teases wage increase

• USD/TRY struggles for clear directions after bouncing off three-week low.
• Turkish President Erdogan signals to review minimum wage to battle inflation.
• US dollar weakenss, risk-on mood could entertain traders ahead of key data/events.

USD/TRY seesaws around 16.50 as traders seek more clues to extend the latest recovery of the Turkish lira (TRY). In doing so, the pair remains sidelined during early Tuesday morning in Europe, after falling the most during 2022 in the last two days.

The TRY pair refreshed its three-week low the previous day in an initial reaction to the Reuters news suggesting more restrictions over lira lending. “The Turkish lira rallied as much as 6% against the dollar on Monday after Turkiye moved to restrict lira lending to many companies with more than $1 million in foreign currency cash in the latest step to reverse a slide in the currency,” said Reuters.

Also contributing to the pair’s weakness were comments from Turkish President Recep Tayyip Erdoğan suggesting more wage hikes to battle inflation. “President Tayyip Erdogan said he has asked the Labour Ministry to review the minimum wage in Turkey due to persistently high inflation, after hiking it by 50% at the end of last year,” said the news shared via Reuters.

On the other hand, the US Dollar Index (DXY) remains pressured for the third consecutive day, at 103.83, down 0.12% intraday by the press time.

It should be noted that the market sentiment improves as China cuts quarantine time for international travelers while also vowing to cope with economic risks.

While portraying the mood, the US Treasury yields and stock futures pare the early-day losses to print mild gains.

Moving on, updates from Turkey, mainly from the North Atlantic Treaty Organization (NATO) nations’ meeting, will be important for the USD/TRY pair as Turkiye pushes allies to stop Sweden and Finland from joining NATO. Further, US CB Consumer Confidence for June, prior 106.4, will precede Wednesday’s ECB Forum as an important catalyst to determine short-term market moves.

Technical analysis

USD/TRY stays on the way to 50-DMA, around 16.00 by the press time, until keeping the downside break of an ascending trend line from May, previous support near 16.95.