USD/TRY analysis as Turkish inflation continues retreating

The USD/TRY exchange rate continued rising on Monday as traders reflected on the latest Turkey inflation numbers. The pair rose to a high of 19.20, which was a few points below the all-time high of 19.31.

Turkey inflation eases

One of the top forex news was the latest Turkish inflation data. According to TurkStat, the country’s inflation dropped at a faster pace than expected. The headline CPI declined from 3.15% in February to 2.29%. This decline was bigger than the median estimate of 2.85%.

On a year-on-year basis, the headline CPI declined from 55.18% to 50.51%, higher than the median estimate of 51.33%. Further, the producer price index (PPI) declined from 76.61% to 62.45% on a year-on-year basis.

Turkish inflation has been in a downward trend for months after peaking at 85.51% in October. This decline happened even as the Central Bank of Turkey (CBRT) decided to slash interest rates from a pandemic peak of 20% to 8%. The most recent rate cut happened in February after the devastating earthquakes.

Analysts believe that Turkey’s inflation could keep rising in the coming months as the administration boosts its spending ahead of the upcoming election. Historically, Erdogan spends money on key projects ahead of a general election.

Analysts believe that the CBRT will start hiking interest rates after the general election. In a note, analysts at Bank of America believe that the CBRT will hike rates by 50-% in Q3, especially if Erdogan losses the election.

Recent polling data shows that the election will be close. Turkey’s AKP leads by about  32% followed by CHP, which stands at about 27.6%. However, polling data in Turkey tend to be highly inaccurate and it is significantly difficult to predict who will win the election.

USD/TRY technical analysis

usd/try

USDTRY chartby TradingView

The USD/TRY exchange rate has been in a slow upward trend in the past few days. It has moved slightly above the 50-day moving average. It is also a few points below the year-to-date high of 19.31. The MACD has moved above the neutral point.

The pair’s MACD indicator has moved above the neutral point. Therefore, the pair will likely remain in this range as investors wait for more news on the upcoming Turkish election. The pair has remained in this range since October last year.

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Source: https://invezz.com/news/2023/04/03/usd-try-analysis-as-turkish-inflation-continues-retreating/