USD/TRY finally surpasses 18.60 to print new all-time highs

• USD/TRY trespasses the 18.6000 level and rose to new tops.
• The firmer dollar remains behind the upside bias in the pair.
• The lira stays under pressure after the CBRT rate cut.

The Turkish lira depreciates to fresh all-time lows vs. the dollar and lifts USD/TRY to the area beyond the 18.6000 region.

USD/TRY: Next target at 19.00

USD/TRY extends its glacial-pace upside momentum to the 18.6000 region at the beginning of the week on the back of the strong rebound in the greenback and the generalized risk-off tone in the global markets.

In addition, the lira faces persistent headwinds as investors continue to digest the larger-than-expected interest rate cut by the Turkish central bank (CBRT) on October 20, which reduced the One-Week Repo Rate to 10.50%. In its statement, the central bank also left the door open to further rate cuts in the next gatherings.

On the latter, it is worth recalling that President Erdogan advocated for further reduction of the interest rates in several occasions, emphasizing at the same time the need of single-digits rates by year end.

What to look for around TRY

USD/TRY finally leaves behind the key barrier at the 18.6000 zone on Monday.

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 (despite rising less than forecast in the last three months), real interest rates remain entrenched well in negative territory and the omnipresent political pressure to keep the CBRT biased towards a low-interest-rates policy.

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: Capacity Utilization, Manufacturing Confidence (Tuesday) – Economic Confidence Index, Trade Balance, Tourism Revenues (Thursday).

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 23.

USD/TRY key levels

So far, the pair is gaining 0.34% at 18.6012 and faces the next hurdle at 18.6280 (all-time high October 24) followed by 19.00 (round level). On the downside, a break below 18.2810 (55-day SMA) would expose 17.8590 (weekly low August 17) and finally 17.7586 (monthly low).