USD/TRY remains side-lined around 13.50/60

• USD/TRY extends the boring mood around 13.50.
• Turkey End Year CPI Forecast revised up to 34.06%.
• Turkey Retail Sales contracted 2.7% MoM in December.

The Turkish lira gives away part of the recent gains and now pushes USD/TRY to the 13.50 region, posting decent gains for the day.

USD/TRY remains side-lined around 13.50/60

USD/TRY advances modestly after three consecutive daily pullbacks, always against the backdrop of the broader consolidative phase well in place since mid-January.

The lira sheds some ground despite results in the domestic docket fell on the positive camp on Friday. Indeed, the Current Account deficit widened less than forecast to $3.84B in December, while the End Year CPI Forecast ticked higher to 34.06% in February (from 29.75%). In addition, Retail Sales contracted at a monthly 2.7% in December and expanded 15.5% from a year earlier.

In the meantime, Turkish finmin N.Nebati defended once again the new economic model based on prioritizing exports and production in a context of lower borrowing costs. He also pledged to bring inflation to single digits (by May 2023) and keep the currency stable, while preventing further dollarization of the economy.

The Turkish central bank (CBRT) will meet on February 17 and consensus expects the One-Week Repo Rate to remain unchanged at 14.00%.

What to look for around TRY

The pair keeps its multi-week 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: 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 0.44% at 13.6296 and a drop below 13.3226 (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).