USD/TRY prediction: CBRT rate decision preview

The USD/TRY price is in a tight range ahead of this week’s Central Bank of the Republic of Turkey (CBRT) interest rate decision. The Turkish lira is trading at 14.60 against the US dollar, where it has been in the past few weeks. 

CBRT interest rates preview 

The CBRT will conclude its monetary policy meeting on Thursday this week. This decision comes at a time when the Turkish economy is going through a difficult period as inflation soars and the unemployment rate remains at elevated levels. 

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Data published this month revealed that the Turkish inflation jumped to 61.1% in March, the highest it has been on record. Unofficial data shows that inflation has jumped to above 70%. This means that the country has the highest inflation rate in the emerging market. 

The CBRT believes that its policies will help to lower inflation to double-digits in the coming months. This will be a tough call considering that the bank has maintained interest rates at a lower level than where they were last year.

While inflation has surged, the Turkish unemployment rate has dropped to about 10.7%, which is significantly lower than where it was during the pandemic. Data published this week showed that Turkey’s retail sales rose by 0.5% in February leading to a year-on-year gain of 6.2%. Its industrial production also did better than expected.

Therefore, analysts expect that the CBRT will leave the benchmark interest rate at 14%. It will also leave its overnight borrowing and lending rates intact at 12.50% and 15.50%, respectively. 

The decision comes at a time when other central banks have embraced a more hawkish stance. The Fed, Bank of England (BOE), Bank of Canada, and the Reserve Bank of New Zealand (RBZ) have boosted their rates.

USD/TRY forecast

The daily chart shows that the Turkish lira has been selling-off against the US dollar. The pair is trading at 14.60, which is about 42% above the lowest level this year. It is also oscillating around the 25-day and 50-day moving averages while the Average True Range (ATR) and Bollinger Bandwith have dropped. 

This signals that volatility has dropped. It has also formed an ascending wedge pattern, signaling that the pair will likely drop after the CBRT decision. If this happens, the next key support level to watch will be at 14.0.

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