USD/TRY treads water around $18.90 ahead of CBRT Interest Rate Decision

• USD/TRY struggles for clear directions after two-day downtrend.
• Turkish government announces economic support for quake-hit areas.
• CBRT expected to leave benchmark rates unchanged for the fourth consecutive month.
• US Dollar struggles to justify hawkish Fed bets, geopolitical fears amid sluggish session.

USD/TRY seesaws around $18.85-90 as Turkish Lira (TRY) traders await the Central Bank of the Republic of Türkiye (CBRT) Interest Rate Decision on early Thursday. The quote’s latest inaction could also be linked to the pullback in the US Dollar and mixed concerns surrounding Türkiye.

As per the latest earthquake updates from Ankara, “The number of people killed in Turkey in this month's devastating earthquakes has risen to 43,556, the country's Interior Minister Suleyman Soylu said overnight,” reported Reuters. The news also quotes the Diplomat as saying to the state broadcaster TRT Haber that there had been 7,930 aftershocks following the first quake on February 6 and that more than 600,000 apartments and 150,000 commercial premises had suffered at least moderate damage.

To battle with the natural calamity, the Turkish government unveiled a temporary wage support scheme on Wednesday and banned layoffs in 10 cities to protect workers and businesses from the financial impact of the massive earthquake that hit the south of the country, per Reuters.

On the other hand, US Dollar Index (DXY) retreats from the weekly high, down 0.16% intraday to 104.35, as the US Treasury bond yields lack momentum during Japan’s holidays. That said, the US 10-year and two-year Treasury bond yields snapped a two-day uptrend the previous day before marking inaction around 3.92% and 4.70%.

It’s worth noting that a retreat in the US inflation expectations, per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED), also weighs on the US Dollar.

Meanwhile, hawkish Federal Open Market Committee’s (FOMC) Monetary Policy Meeting Minutes and comments favoring further rate hikes from St. Louis Fed President James Bullard, as well as from Federal Reserve Bank of New York President John Williams, probe DXY bears. On the same line are the US-China tussles over Beijing’s ties with Moscow.

Against this backdrop, S&P 500 Futures bounced off the monthly low to print mild gains around 4,020 whereas the Treasury bond yields remain sidelined amid off in Japan.

Looking forward, CBRT is likely to leave the benchmark rate unchanged at 9.0% for the fourth consecutive time, especially amid the natural calamities. The same can allow the USD/TRY to print some gains ahead of Friday’s US Core Personal Consumption Expenditures (PCE) Price Index data, the Fed’s favorite inflation gauge.

Technical analysis

Although the overbought RSI (14) challenges USD/TRY buyers, the downside remains elusive unless the quote stays firmer past the 50-DMA, near $18.75 by the press time.