Lower Inflation and Higher Wages Could Trigger GBP/TRY Exchange Rate Rally
The Pound to Turkish Lira exchange rate (GBP/TRY) has risen on 19th March, as part of continuing gains seen since late February.
The GBP/TRY exchange rate could be on the cusp of rising further in the coming days, when high-impact UK inflation and earnings data is released.
Annual inflation in February is tipped to have slowed from 3% to 2.8%, while the pace of wage growth in January is also on track to rise.
These results could reduce the current wage squeeze, which may in time lead to higher UK retail sales activity and growth on the all-important services sector PMI.
An inflation rate slowdown isn’t set in stone, however – Simon Ward of investment company Janus Henderson has cautioned that;
‘Things are still pretty grim, but they are moving in the right direction. It’s too early to call an end to the squeeze because I expect inflation to be quite sticky.
I expect it to be 2.5% by the end of the year and for wages to increase and only cross over in the autumn’.
If the forecasts are proven wrong and UK inflation remains static or is reported higher in February, the Pound could decline in value and drop against the Turkish Lira.
Chance of Pound to Lira (GBP/TRY) Exchange Rate Decline if BoE Issues Cautious Forecast
While there may be mid-week Pound to Lira gains, 21st March’s Bank of England interest rate decision could prevent a week-long GBP/TRY exchange rate rally.
The interest rate decision itself isn’t expected to bring much influence, as BoE policymakers are tipped to leave rates on hold at 0.50%.
More important will be the BoE’s minutes for its latest meeting, as well as a press conference from Governor Mark Carney.
The Pound could lose ground against the Lira if the minutes indicate a cautious outlook from the bank, or if Mr Carney downplays expectations of a BoE interest rate hike in the coming months.
Further Lira to Pound (TRY/GBP) Exchange Rate Losses Possible on Falling Turkish Consumer Confidence
The Turkish Lira could fall further against the Pound in the near-term, when consumer confidence data for March is released.
Current estimates are for a slowdown in the reading for March, from 72.3 points to 71.7.
Confidence levels in the country have failed to breach the 75-point boundary since late 2015, with terror attacks, conflict with Russia and an attempted coup all lowering optimism.
A falling confidence score could cement the Lira’s status as the weaker currency this week, with only an unexpected rise in consumer sentiment representing a chance of a TRY/GBP advance.
Risk of Additional Turkish Lira to Pound (TRY/GBP) Decline from Lower Business Confidence
The week’s other Turkish data has also been forecast negatively – this will be the business confidence reading for March, released on the 22nd.
As with the consumer confidence reading, business sentiment is tipped to fall. In this case, a forecast-matching slide from 110.8 points to 110.5 could drag the Lira further down.