USD/TRY Outlook: Bullish, as the exchange rate is at 90-day highs and significantly above its recent average.
Key drivers:
- Rate gap: The Federal Reserve is expected to cut rates while Turkey’s central bank has recently reduced its benchmark rate, widening the gap in monetary policy.
- Risk/commodities: Weakness in oil prices can negatively affect the Turkish economy, impacting the lira, though current oil trends show stability.
- One macro factor: Recent data shows inflation in Turkey has begun to rise again, creating challenges for the lira.
Range: The USD/TRY is likely to hold within its recent range, hovering around current levels after reaching new highs.
What could change it:
- Upside risk: A surprise announcement from the Federal Reserve signaling a shift in monetary policy could further strengthen the USD.
- Downside risk: A significant deterioration in Turkey's economic indicators, particularly inflation or intervention strategies, could weaken the lira.
