The EUR/TRY exchange rate has recently demonstrated stability amidst broader economic developments impacting both the Eurozone and Turkey. Currently trading at 48.64, the euro stands just 0.8% above its three-month average of 48.26, exhibiting a stable range between 46.37 and 48.95.
Recent Eurozone economic data has shown a mixed picture. Preliminary GDP figures for the third quarter exceeded expectations, yet inflation continues to be a concern. Analysts suggest that any moderation in upcoming inflation data could increase speculation about potential rate cuts from the European Central Bank (ECB) next year. Such shifts in monetary policy could lead to a weaker euro if the ECB adopts a more dovish stance in reaction to economic pressures.
Economic indicators in Turkey present a contrasting narrative. Annual inflation soared to 33.3% in September, driven by rising costs in essential sectors, raising uncertainties about the central bank's ability to manage monetary policy effectively. Despite the elevated inflation and challenges, the European Bank for Reconstruction and Development has slightly raised Turkey's GDP growth forecast for 2025 amidst improved domestic financial conditions.
Geopolitical factors continue to weigh on both currencies. Ongoing conflicts, particularly the war in Ukraine, have affected energy prices and economic stability in the Eurozone while adding pressure to the Turkish lira due to its ramifications on inflation and trade balance. Notably, recent oil price movements, with crude trading at $65.00, indicate volatility, as prices have fluctuated significantly between $60.96 and $72.53 over the past three months. This instability can also affect currency values, particularly for countries reliant on energy imports, such as Turkey.
The Turkish lira’s recent developments include the termination of the FX-protected deposit scheme, which had significant implications for the currency's valuation. The UAE-Turkey currency swap agreement could help enhance local currency liquidity and mitigate some of the pressure facing the TRY.
Market experts maintain that close monitoring of both Eurozone inflation trends and Turkey's economic adjustments will be crucial in forecasting the EUR/TRY exchange rate. As these economies navigate their respective challenges, fluctuations in the EUR/TRY pair are likely to persist, driven by a complex interplay of inflationary pressures, central bank policies, and geopolitical uncertainties.
