Optimistic BoE Outlook could Trigger GBP/TRY Exchange Rate Advance
The Pound (GBP) has made a small advance against the Turkish Lira (TRY) today, after a major Turkish vote and before a UK economic report comes out.
This latter document, the Bank of England (BoE) financial stability report, might have a significant positive impact on the GBP/TRY exchange rate on Wednesday.
The report has two purposes, as in addition to looking at the state of the UK economy at present, it also offers a forecast on what could affect the country in the future.
The report will likely be considered in the context of last week’s BoE interest rate decision, where policymaker Andy Haldane surprisingly backed an interest rate hike.
Mr Haldane’s decision led economists to predict that an August interest rate hike could now be on the way.
With that in mind, if the BoE report suggests that the UK economy could strengthen in the coming months then Pound Sterling could rise sharply against the Lira.
Confirmation of UK GDP Slowdown could Cause GBP/TRY Exchange Rate Losses
Later on this week, there is a risk of Pound Sterling (GBP) losing ground to the Turkish Lira (TRY) on Friday when UK Q1 GDP stats will come out.
These finalised figures are predicted to confirm that UK GDP growth slowed in the first quarter of 2018, showing a shaky start to the year.
As well as a pair of snowstorms battering the UK over February and March, UK economic growth was also hindered by fears about how Brexit talks would develop.
The finalised reading is expected to confirm what many GBP traders have already been thinking, but could still be enough to cause a GBP/TRY exchange rate decline.
Turkish Lira to Pound (TRY/GBP) Exchange Rate Losses Forecast on Trade Deficit Expansion
On the other side of the currency pairing, the Turkish Lira to Pound Sterling (TRY/GBP) exchange rate could be affected in the near-term by trade balance data out on Friday.
The measurement of Turkish trade in May is predicted to show a widening of the already substantial deficit of -6.69bn, to a new figure of -7.4bn.
Turkey has held a sizable trade deficit for over a decade, but a worsening of the deficit reading might still cause a drop in trader confidence and devalue the TRY.
Are TRY/GBP Exchange Rate Gains ahead on Higher Manufacturing PMI?
Looking beyond Friday’s Turkish trade balance data, the Turkish Lira could also be affected by a manufacturing sector PMI reading out on 2nd July.
This measure of manufacturing sector activity is tipped to show a significant recovery in the manufacturing sector during June, with a shift from 46.4 points to 53.4.
Any reading below 50 points indicates contraction, so such a move would represent a jump back up into the growth range.
The Turkish manufacturing sector has grown over much of 2017 and 2018 so far, so a recovery could be enough to spark TRY/GBP exchange rate gains next week.