USD/TRY: Turkish lira sleeps and waits for the Fed, CBRT decisions
The USD/TRY exchange rate was in a consolidation phase as traders waited for the upcoming Fed and CBRT interest rates decision. The pair was trading at 27, a few points below its all-time high. It has jumped by more than 46% from the lowest level this year.
CBRT and Fed decisionsCopy link to section
The USD/TRY pair will be in the spotlight as the Federal Reserve and CBRT deliver their interest rate decisions. The consensus view is that the Fed will leave rates unchanged between 5.25% and 5.50%. It will also point to at least one more hike later this year.
The Fed is dealing with mixed signals. Inflation has risen sharply in the past few months, helped by the rising crude oil prices. Brent has jumped to $95 and there are signs it could hit $100. Analysts at Goldman Sachs believe that there is more upside.
At the same time, millions of Americans are scheduled to restart their student loan payments. Also, there is a long traffic jam at the Panama Canal while auto workers are in a strike that has no end in sight. Therefore, the pause will be needed for the bank to assess the state of the economy.
The USD/TRY exchange rate will also react to the upcoming CBRT decision. Most economists expect the bank to continue hiking rates in the coming meeting. It will hike from 25% to 30%, which is higher than its May low of 8.50%.
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The CBRT has been hiking rates in the past few months in a bid to fight inflation. Recent data showed that the headline consumer inflation jumped to almost 50% in August. Higher interest rates help to lower inflation by reducing demand and making cash more attractive.
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USD/TRY technical analysisCopy link to section
The Turkish lira has been in a freefall for years and is now trading near its record low of 27.26. The pair remains above all moving averages and has found a strong resistance point at its all-time high. Most importantly, it has not reacted to the past actions by the CBRT and the Fed.
Therefore, the outlook for the pair is neutral with a bullish bias. The next key level to watch will be at the psychological level at 28. The alternative scenario is where the pair drops to the psychological level of 26.