USD/TRY treads water above 18.60, focus on US docket

• USD/TRY extends the range bound theme above 18.6000.
• Turkish inflation seems to have peaked in recent months.
• Turkish CPI rose less than expected in November.

The Turkish lira starts the week on the defensive and motivates USD/TRY to resume the upside above 18.6300 on Monday.

USD/TRY looks bid post-CPI

USD/TRY fades Friday’s downtick and manages to gather some upside traction at the end of the new week, although the broader side-lined theme remains largely unchanged for the time being.

The selling bias in the lira picks up pace on Monday after Türkiye’s inflation figures measured by the CPI rose a tad below consensus at 84.39% in the year to November, while the Core CPI gained 68.91% over the last twelve months and Producer Prices increased 136.02% from a year earlier.

What to look for around TRY

USD/TRY remains side-lined above/around the 18.6000 region amidst omnipresent intervention in the FX markets.

So far, 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 and real interest rates remain entrenched well in the negative territory.

In addition, the lira is poised to keep suffering against the backdrop of Ankara’s plans to prioritize growth via transforming the current account deficit into surplus, always following a lower-interest-rate recipe.

Key events in Türkiye this week: Inflation Rate (Monday).

Eminent issues on the back boiler: FX intervention by the CBRT. Progress of the government’s 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 2023.

USD/TRY key levels

So far, the pair is gaining 0.15% at 18.6247 and faces the next hurdle at 18.6664 (all-time high December 2) followed by 19.00 (round level). On the downside, a break below 18.5339 (55-day SMA) would expose 18.3642 (monthly low November 7) and finally 18.2967 (100-day SMA).