USD/TRY Outlook:
The USD/TRY rate is likely to increase as it trades significantly above its recent average and is near recent highs. Supporting factors include the strength of the US labor market combined with ongoing pressures on the Turkish lira.
Key drivers:
• Rate gap: The Federal Reserve's higher interest rates make the USD more attractive compared to the Central Bank of Turkey's recent cuts.
• Risk/commodities: Rising oil prices can create inflationary pressure in Turkey, which may negatively impact the TRY.
• One macro factor: A forecasted decline in durable goods orders in the US might temporarily pressure the dollar, but overall economic resilience supports the USD.
Range:
USD/TRY is expected to test the higher end of its recent range, oscillating within a narrow band, as influences from both economies persist.
What could change it:
• Upside risk: Any signs of stronger-than-expected US job growth may further support the dollar.
• Downside risk: A rapid deterioration in Turkey's economic data could lead to a stronger lira rebound against the dollar.