USD/TRY inches higher and approaches 18.20

• USD/TRY extends the gradual march north to the 18.20 region.
• The better tone in the dollar lifts the pair to fresh YTD highs.
• Türkiye GDP expanded 7.6% YoY during the second quarter.

Further upside in the US dollar keeps USD/TRY near the 2022 tops in levels just shy of 18.20 on Wednesday.

USD/TRY still targets the all-time top around 18.25

In the meantime, the bullish bias is unlikely to abandon USD/TRY for the time being, with the immediate target at the all-time high around 18.25 (December 20 2021).

Furthermore, the pair posted gains in every month since the start of the year and the lira advanced in only one out of the last nine weeks vs. the dollar.

Positive news from the domestic docket also failed to lend some wings to the Turkish currency after GDP figures showed the economy expanded at an annualized 7.6% during the April-June period, surpassing expectations at the same time.

What to look for around TRY

The upside bias in USD/TRY remains unchanged and trades closer to the all-time high around 18.25. The uptrend in spot has been underpinned following the unexpected interest rate cut by the CBRT on August 18.

In the meantime, price action around the Turkish lira is expected to keep gyrating around the performance of energy and commodity prices - which are directly correlated to developments from the war in Ukraine - the broad risk appetite trends and the Fed’s rate path in the next months.

Extra risks facing the Turkish currency also come from the domestic backyard, as inflation gives no signs of abating (despite rising less than forecast in July), real interest rates remain entrenched well in negative territory and the political pressure to keep the CBRT biased towards low interest rates remains omnipresent.

In addition, there seems to be no other immediate alternative to attract foreign currency other than via tourism revenue, in a context where official figures for the country’s FX reserves remain surrounded by increasing skepticism among investors.

Key events in Türkiye this week: Economic Confidence Index, Trade Balance (Monday) – Q2 GDP (Wednesday) – Manufacturing PMI (Thursday).

Eminent issues on the back boiler: FX intervention by the CBRT. Progress 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. Presidential/Parliamentary elections in June 23.

USD/TRY key levels

So far, the pair is gaining 0.07% at 18.1741 and faces the immediate target at 18.1973 (2022 high August 29) seconded by 18.2582 (all-time high December 20) and then 19.00 (round level). On the other hand, a breach of 17.7586 (monthly low August 9) would pave the way for 17.5781 (55-day SMA) and finally 17.1903 (weekly low July 15).