EUR/TRY Outlook:
The EUR/TRY outlook is likely to increase as the rate is trading about 2.3% above its 3-month average and near recent highs. This suggests upward momentum in the euro against the Turkish lira.
Key drivers:
• Rate gap: The European Central Bank maintains a neutral stance while the Central Bank of Turkey keeps interest rates high to combat inflation, creating a favorable rate gap for the euro.
• Risk/commodities: Oil prices are at 90-day highs, which could increase import costs in Turkey, putting further pressure on the lira.
• One macro factor: Turkey's inflation remains high, projected at 24%, leading to significant economic challenges that may weaken the lira further.
Range:
Expect the EUR/TRY to test recent highs within its 3-month range as it shows clear upward movement.
What could change it:
• Upside risk: A decrease in Turkish inflation rates could bolster the lira's strength.
• Downside risk: Further political instability could lead to increased volatility for the lira.