USD/TRY forecast: No end in sight for the Turkish lira plunge
- The USD/TRY pair rose to an all-time high on Friday.
- It has risen in the past six consecutive days this week.
- The pair will likely keep rising ahead of the next CBRT decision.
The USD/TRY pair rose for the sixth consecutive day as investors reacted to the latest US retail sales data. The pair’s rally was also because of fears of more interest rate cuts by the Turkish central bank (CBRT). It is trading at 9.2110, which is a few points below its all-time high. It has risen by 33% from its lowest level in February this year. This makes the Turkish lira the worst-performing emerging market currency.
US retail sales
The US retail sales did relatively well in September. According to the Census Bureau, the headline retail sales rose by 0.7% in September after rising by 0.9% in August. This decline was better than the median estimate of -0.2%. In total, sales rose from $620 billion in August to $625.4 billion. Core retail sales dropped from 2.0% in August to 0.8% in September. This was better than the estimated 0.5%.
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These numbers show that American consumers are still spending as the economy recovers. Most of this spending happened in restaurants and bars. They also spent money on autos and auto parts as more states reopened.
At the same time, the data shows that sales remained strong even as prices rose. Data published on Wednesday showed that the headline consumer price index (CPI) rose from 5.3% in August to 5.4% in September. The core CPI, which excludes food and energy, remained at 4.0%. These numbers were substantially higher than the Fed target of 2.0%.
Analysts expect that prices will keep rising. For example, the price of crude oil rose to an eight-year high this week while natural gas rose to a record high. Gasoline prices have risen to as much as $5 per gallon in some states. Elsewhere, there is an ongoing supply challenge as ports remain overwhelmed.
Turkey central bank firings
The USD/TRY pair also rose as investors started to price in another interest rate cut by the CBRT. This is after the country’s president fired three central bank officials on Thursday. He dismissed Semih Tumen, Ugur Namik Kucuk, and Abdullar Yavas.
The decision means that the relatively new governor will have more leeway to implement more interest rate cuts as desired by the president. In September, the bank surprised the market by slashing interest rates even as the latest data showed that inflation was rising. The country’s inflation rose to 19.58% in September and there are risks that it will keep rising in the coming months. The bank will meet next on October 21st.
USD/TRY technical analysis
The daily chart shows that the USD/TRY price has been in a strong bullish trend in the past few days. The pair managed to move above the key resistance at 8.8240, which was the previous all-time high. It is above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) and MACD have kept rising. Therefore, the pair will likely keep rising as investors wait for the next CBRT decision.
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