USD/TRY rockets to an all-time high as odds of a CBRT rate cut rise

The USD/TRY price jumped to a record high after the relatively weak Turkish consumer inflation data from Turkey and expectations that the CBRT will slash interest rates. It is trading at 8.635, which is slightly below the all-time high of 8.171.

Turkey inflation eases

In a report published on Thursday, the Turkish statistics agency said that the country’s headline consumer price index (CPI) fell to 16.59% in May from 17.14% in April. This decline was a surprise since analysts were expecting the figure to rise to 17.25%. On a month-on-month basis, the CPI fell from 1.68% in April to 0.89% in May. It was also lower than the median estimate of 1.46%.

The producer price index (PPI) also declined from 4.34% in April to 3.92% in May. On a year-on-year basis, the index rose from 35.17% to 38.33%.

The USD/TRY rose because these numbers hint that the CBRT will lower interest rates when it meets this month. Furthermore, the new governor was installed to replace the previous governor who managed to stabilise the currency through rate hikes. Before becoming governor, he made the case that higher interest rates tend to cause inflation.

Also, recently, the Turkish president managed to replace a relatively hawkish committee member. Therefore, since he hates high rates, his actions mean that the other members could be under pressure to lower rates.

Looking ahead, the USD/TRY pair will react to the latest employment data from the United States. Later on Thursday, the Bureau of Labour Statistics (BLS) will publish the latest initial jobless claims numbers. Analysts expect the data to show that the number fell below 400,000 for the first time since the pandemic started. And on Friday, the BLS will publish the latest non-farm payrolls numbers from the US.

USD/TRY technical analysis

The daily chart shows that the USD/TRY pair moved above 8.5752 on Wednesday this week. This was a notable price action since it was the previous highest level on record. The pair remains above the 25-day and 50-day exponential moving averages (EMA) while the MACD is above the neutral line. The two lines of the stochastic oscillator are slightly below the overbought level. Therefore, the pair will likely keep pushing higher as traders target the next key resistance at 9.00, which is about 5% above the current level.