The EUR to TRY exchange rate is currently positioned near recent highs at approximately 49.25, which is about 1.2% above its 3-month average of 48.66. The euro has shown a stable trading range over the past three months, fluctuating between 47.89 and 49.25. The ongoing geopolitical tensions, particularly surrounding the Russia-Ukraine conflict, continue to influence market sentiment, creating risk-on and risk-off environments that impact the euro's strength against the lira.
Recent forecasts indicate that the euro could experience support from improving economic sentiment in the Eurozone and a potentially hawkish tone from the European Central Bank (ECB) following its recent monetary policy meetings. However, analysts note that a dovish shift from the ECB, especially as the central bank prepares to cut rates from 4.0% to 3.5% by late 2025, could limit the euro's appreciation and narrow the interest rate differential against the U.S. dollar. The recovery narrative for the euro remains contingent on sustained improvements in macroeconomic indicators and geopolitical stability, with Bulgaria's upcoming eurozone accession expected to bolster the currency’s circulation.
In contrast, the Turkish lira faces several challenges. The central bank recently reiterated its inflation targets, which have been adjusted upwards amid surging inflation, currently cited at 33.29%. Furthermore, the central bank's decision to reduce the policy interest rate to 39.5% poses inflation risks and reflects concerns about slowing economic momentum. Political unrest, marked by recent protests and significant volatility in the lira, also poses a major risk to its stability.
Crucially, fluctuations in oil prices can greatly affect the Turkish lira due to Turkey's reliance on energy imports. Current oil prices are at $63.07, which is 3.2% below the 3-month average of $65.18 and recently traded within a volatile range of $60.96 to $70.13. Any significant movements in oil could impact inflation and thus the central bank's policy stance, which in turn would have repercussions for the lira's value against the euro.
As the situation evolves, the interplay between the ECB's actions, Turkey's economic policies, and broader geopolitical developments will play a crucial role in determining the trajectory of the EUR/TRY exchange rate. Analysts and forecasters will continue to monitor these factors closely as they assess future movements in the currency pairs.
