CHF/TRY Outlook: Likely to increase, as it is trading above its recent average and near recent highs, supported by significant factors affecting both currencies.
Key drivers:
- Rate gap: The Swiss National Bank's policy of maintaining a 0% rate contrasts sharply with Turkey's recent rate cuts, creating pressure on the lira.
- Risk/commodities: Rising oil prices are increasing inflationary pressures in Turkey, which puts continued strain on the lira, making the Swiss franc more attractive.
- One macro factor: Switzerland's trade surplus decline due to recent trade tariffs is contributing to a stronger franc against the lira as investors seek stability amid uncertainty.
Range: CHF/TRY is likely to test highs and possibly drift within its recent three-month range given its current position.
What could change it:
- Upside risk: A sudden improvement in Eurozone economic conditions could support the CHF further.
- Downside risk: If Turkey's inflation worsens significantly, this could lead to more aggressive central bank interventions that might weaken the lira further.