USD/TRY Outlook:
The USD/TRY is likely to increase as it currently trades above its recent average and is near recent highs, supported by the Federal Reserve's monetary policy stance.
Key drivers:
- Rate gap: The US Federal Reserve is maintaining a tighter monetary policy, contrasting with Turkey's recent rate cuts, which puts pressure on the Lira.
- Risk/commodities: Oil prices are elevated, impacting the Turkish economy and creating challenges for the TRY, which relies heavily on energy imports.
- One macro factor: The IMF's positive outlook on Turkey, combined with declining inflation rates, offers some support for the TRY but is overshadowed by the overall economic environment.
Range:
The USD/TRY is expected to hold within its recent range while flirting with upper levels, reflecting a stable yet slightly bullish trend.
What could change it:
- Upside risk: A significant increase in US interest rates could further strengthen the USD against the TRY.
- Downside risk: Any unexpected deterioration in Turkey's economic outlook or renewed geopolitical tensions could pressure the TRY lower.