Bias: The EUR/TRY is bullish-to-range-bound, currently above the 90-day average and in the upper half of the 3-month range.
Key drivers:
- Rate gap: The European Central Bank maintains a neutral policy stance, while the Central Bank of Turkey has recently reduced interest rates, which favors the euro over the lira.
- Risk/commodities: Recent oil prices are above the average, which may support the euro due to its link to overall economic sentiment and energy costs.
- Macro factor: Turkey faces rising inflation amid persistent adverse conditions like drought, which puts pressure on the lira.
Range: The EUR/TRY is likely to hold near current levels with potential to drift within the established 3-month range.
What could change it:
- Upside risk: Increased confidence in Eurozone economic growth, driven by stable inflation trends, could boost the euro.
- Downside risk: Escalating inflation in Turkey or further monetary easing by the Central Bank may lead to increased depreciation of the lira.