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Pound to Turkish Lira Exchange Rate Plunges on UK Data despite Slip in Turkish Inflation

Turkish Lira Currency Forecast

Pound to Turkish Lira Exchange Rate Tumbles in Delayed Reaction to UK Services Report

The Pound to Turkish Lira (GBP/TRY) exchange rate plunged on Monday as investors digested the latest UK data and adjusted their expectations for this week’s Bank of England (BoE) policy decision.

Despite edging higher from 5.31 to 5.32 last week and briefly touching on a high of 5.36 on Thursday, GBP/TRY shed all those gains on Monday and trended near its worst levels in over a week – 5.28.

Markit’s UK services PMI for January was forecast to edge higher slightly, from 54.2 to 54.3, but instead fell to a disappointing 53.0. This was the lowest figure for the print in over a year – since September 2016.

Economists at Markit noted that the slowdown was at least partially due to Brexit uncertainty, which made investors anxious that Britain’s economy was not seeing as much resilience to the Brexit process as hoped.

The overall January composite print disappointed too, falling from 54.9 to 53.5.

Turkish Lira (TRY) Exchange Rates Steady Despite Slowing Turkish Inflation

The Turkish Lira (TRY) was able to hold its ground against a weaker Pound (GBP) on Monday, despite news that Turkey’s latest inflation rate had slowed further than economists expected.

Turkish inflation slowed from 11.92% to 10.35 year-on-year in January, with the monthly rate accelerating from 0.69% to 1.02% but still coming in lower than many analysts expected.

According to a Reuters poll of economists (via Nasdaq), the monthly Consumer Price Index (CPI) figure was forecast to rise at 1.28%.

Turkish inflation printing below expectations was likely a good sign to the Central Bank of the Republic of Turkey (CBRT), as high inflation has become one of the Turkish economy’s biggest challenges.

The report indicated that a weaker US Dollar (USD) in recent months had strengthened the Lira, which helped to keep Turkish inflation in check.

Pound to Turkish Lira (GBP/TRY) Outlook Forecast to be influenced by Bank of England (BoE)

With the Pound to Turkish Lira (GBP/TRY) exchange rate being largely driven by Sterling movement so far this week, investors of the pair are highly anticipating Thursday’s Bank of England (BoE) policy decision.

Besides Turkey’s January treasury cash balance report and Britain’s Halifax house price index on Wednesday, the economic calendar will be relatively quiet until Thursday regardless.

Unless GBP/TRY rebounds from its Monday lows, the chances of a recovery before Thursday’s BoE policy decision are low.

If the Bank of England (BoE) hints that UK inflation must be tackled despite weaker UK data in reent sessions though, this is likely to lead to a solid boost in Pound demand that could leave GBP/TRY higher by the end of the week.

On the other hand though, if the bank expresses fresh concern about the health of Britain’s economy, the Pound could remain limp against the Turkish Lira and Friday’s UK trade and production data may not make the currency more appealing either.

Notable Turkish data, including industrial production and retail sales from December, will be published on Thursday. These have the potential to influence the Pound to Turkish Lira exchange rate too.