Surprise Interest Rate Decision brings Major GBP/TRY Exchange Rate Rise
Pound Sterling (GBP) has made major gains against the Turkish Lira (TRY) today, rising by 3.5% to hit an exchange rate of 6.4245.
This spike in the GBP/TRY exchange rate has put the Pound at its best level in the pairing in almost two weeks and shows how alarming today’s Turkish news has been.
Against all forecasts, the Turkish central bank (TCMB) left interest rates at 17.75% during their July meeting instead of raising them up to 18.75%.
This was a major upset for TRY traders and has caused an all-round devaluation of the Turkish currency, to the advantage of Pound Sterling traders.
Considering this a sign that Turkish President Recep Tayyip Erdogan is putting pressure on the TCMB, Capital Economics’ Jason Tuvey said:
‘[Mr Erdogan is] already using his strengthened position to influence monetary policy.’
The President gained sweeping new powers earlier this month and is thought to be trying to lower interest rates to encourage growth.
A large part of the damage has come from the idea that Mr Erdogan is influencing the TCMB, which is supposed to be an independent organisation.
Pound Sterling to Turkish Lira Exchange Rate Forecast: Will GBP/TRY Rise on BoE Interest Rate Hike?
Looking ahead to the coming week, the Pound to Lira (GBP/TRY) exchange rate could turn volatile on the Bank of England (BoE) interest rate decision on August 2nd.
This might bring a Pound-boosting interest rate hike from 0.5% to 0.75%, or BoE policymakers could hold fire for another month.
A 2018 BoE interest rate hike has been pencilled in by a number of economists, which raises the stakes for GBP/TRY movement on the day.
The problem boils down to UK economic data, which has been distinctly unsupportive over the previous week.
If BoE officials feel that UK households and businesses can withstand the effects of higher interest rates, then they could commit to the first real rate hike since 2007.
On the other hand, yet another interest rate freeze when so many are looking for a hike could drag the GBP/TRY exchange rate lower.
Turkish Lira to Pound (TRY/GBP) Exchange Rate Could Rise on Higher Business Confidence
For Turkish Lira (TRY) traders, a rise against the Pound (GBP) could come as early as Wednesday afternoon when July’s business confidence reading is released.
This is predicted to show higher business optimism during the month, from the previous 104.6 points to 105.2.
Business confidence levels in Turkey are known for fluctuating on a month-by-month basis, but growth is still supportive and could bring a TRY/GBP exchange rate recovery.