fresh earthquakes ahead of CBRT decision

The USD/TRY exchange rate has been calm this month even as Turkey has experienced the worst disaster of 2023. The pair has remained at 18.86, where it has been stuck at for months. This price is a few points below its all-time high of ~19.31. 

Turkey earthquake news

A natural disaster can have significant consequences to a country. In 2011, Japan’s GDP slowed dramatically after an earthquake led to almost 20,000 deaths. Turkey, unfortunately, is expected to have a slowdown in 2023 after a major earthquake killed over 40,000 people. 

On Monday, Turkey experienced two earthquakes measuring 6.4 and 5.8 on the Richter scale. Official reports are that the new quakes killed three people and injured 200 more. The numbers are expected to be a bit higher.

Analysts now believe that the Turkish economy will be hit by these earthquakes. In a report last week, a European agency said that the economy will lose about 1% of its GDP. At the same time, the World Economic Forum estimates that Turkey needs about $85 billion. JP Morgan analysts expect that the country’s damage is estimated to be worth $25 billion.

The Turkish lira has held quite well during this crisis even though it sits near its all-time low. This performance is likely because of increased inflows in form of donor cash and the ongoing liraization strategy.

The USD/TRY forex pair will next react to the upcoming Central Bank of the Republic of Turkey (CBRT) decision scheduled for Thursday. Economists, using the bank’s previous guidance, has hinted that it will leave interest rates unchanged at 9%. 

The recent earthquakes and the upcoming elections, however, could push the CBRT to restart its rate cuts. Besides, data shows that inflation has started moving downwards.

USD/TRY forecast


USD/TRY chart by TradingView

The USD/TRY exchange rate has moved sideways in the past few months. It has remained in a consolidation phase partly because of the liraization strategy by the CBRT. As a result, it is consolidating at the 25-day and 50-day moving averages while the Bollinger Bands have narrowed. 

Therefore, at this stage, the outlook of the USD to TRY pair is neutral. We can assume that the pair will remain in this range in the near term since the past CBRT and Fed meetings and the recent earthquake have not moved the pair.