USD/TRY deep slumber continues ahead of CBRT decision

The USD/TRY exchange rate remained in a consolidation phase after the latest Federal Reserve interest rate decision. It has been stuck at 19 in the past few months as focus shifts to the upcoming CBRT interest rate decision 

CBRT decision ahead

The USD/TRY price moved sideways after the latest interest rate decision by the Federal Reserve. In a statement, the Fed decided to hike rates by 0.25% as was widely expected. This was a more balanced decision considering that the market conditions have changed after the last decision.

The biggest change is that the banking system has changed rapidly in the past two weeks. Several banks, including Silicon Valley Bank and Credit Suisse, have collapsed. And now, PacWest and First Republic are on life support. 

The statement added that the Fed will continue with its quantitative tightening policy even as the bank downgraded the economic growth for 2023 and 2023. Further, the dot plot showed that interest rates will peak at 5.125% in 2023 followed by 4.25% in 2024 and 2.5% in the long term.

The market is clear that the Fed statement is not set in stone because of the fluidity of the market. Two weeks ago, Jerome Powell hinted that the bank would hike interest rates by about 0.50% in this meeting. Therefore, with banks failing, a situation where the Fed changes its tune before the next meeting.

The next key catalyst for the USD/TRY price will be the upcoming CBRT interest rate decision scheduled for Thursday. Economists expect that the CBRT will maintain its status quo by leaving interest rates unchanged at 8.5% where they have been in the past few months.

The most recent data showed that Turkish inflation dropped once again to 55.5% in February. It rose by 3.5% on a month-on-month basis even after the massive earthquakes.

USD/TRY forecast

The USD/TRY price has remained in a consolidation phase in the past few CBRT and interest rate decisions. Therefore, unless the CBRT does something new, the view is that the pair will remain in this range for a while. The key point to watch will be the important resistance point at 19.31, the all-time high. A move above that level will signal more downside for the Turkish lira.