USD/TRY: Turkish lira forecast after the mild CBRT decision

By:
on Jun 23, 2022
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  • The USD/TRY pair is nearing its all-time high after the CBRT decision.
  • The central bank left interest rates unchanged at 14%.
  • This happened even as the Turkish inflation surges.

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The USD/TRY price continued rising after the Turkish Central Bank (CBRT) concluded its two-day monetary policy meeting. The pair is trading at 17.36, which is slightly below the all-time high of 18.32. It has jumped by over 68% from its lowest level this year.

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CBRT interest rate decision

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The CBRT concluded its monetary policy meeting and di what most analysts were expecting. The committee decided to leave the main repo rate unchanged at 14%. It has not changed interest rates since last year when it implemented several rate cuts.

In a statement, the bank said that the Turkish economy was doing well in a challenging environment. It attributed this strong growth to robust external demand, which has been helped by the weak Turkish lira. The rebound of tourism has also helped the economy. On inflation, the CBRT said:

“The CBRT will continue to use all available instruments decisively within the framework of liraization strategy until strong indicators point to a permanent fall in inflation and the medium-term 5 percent target is achieved.”

The CBRT rate decision came at a time when the Turkish consumer price index has been in an upward trend. Data published three weeks ago showed that inflation surged to a 24-year high of 73.5% in May this year. Unofficial studies shows that the country’s inflation has surged by more than 90%.

The main cause of inflation is the soaring energy prices and the ongoing weakening of the Turkish lira. As a key energy importer, the soaring prices of oil and gas are costing the economy more money.

The next key catalyst for the USD/TRY price will be the upcoming statement by Jerome Powell. He will be testifying before a congressional committee. When talking to senators on Wednesday, Powell noted that the bank will continue with its hiking policies until inflation started falling.

USD/TRY forecast

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USD/TRY

The daily chart shows that the USD to TRY price continued rising after the latest CBRT interest rate decision. The pair has managed to move above the upper side of the ascending channel that is shown in black. It has also moved above the 25-day and 50-day moving average while the Relative Strength Index (RSI) has risen above the overbought level.

Therefore, the pair will likely continue rising as investors target the all-time high of 18.33. The situation will only change if the CBRT signals that it will hike rates.

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