GBP/TRY Exchange Rate Rollercoaster Ride Continues as Lira Rallies
The Pound Turkish Lira (GBP/TRY) exchange rate is currently sliding as the Lira mounts a recovery after diving last week, but is this rally sustainable?
At the time of writing the GBP/TRY exchange rate is down around 3.3% as the Lira takes strides towards recouping the almost 20% fall it experienced last week.
Turkish Lira (TRY) Exchange Rates Show Signs of Recovery But Will it Last?
The Turkish Lira (TRY) has had a trying few session over the last seven days, falling as much as a third in value and striking a new record low against the US Dollar (USD), as confidence in the country’s financial situation collapsed.
While the Lira now shows signs of recovery, advancing around 10% in the past couple of days, the economic outlook from analysts remains fairly bleak.
There are a range of reasons behind the gloomy assessment, but the fundamentals behind the move appears to be Turkey’s soaring inflation rate and President Recep Tayyip Erdogan’s interference with Turkey’s central bank.
Erdogan’s resistance to raising interest rates appears to be particularly worrying for TRY investors, with conventional economists suggesting that without a sharp rate hike, the current measures taken by the central bank are likely to only provide short-term relief for the Lira.
Heaping even more pressure on the Lira is the current diplomatic spat between Washington and Ankara, with the US imposing higher steel tariffs on Turkey over the detainment of American pastor Andrew Brunson, which analysts also suggest must be solved if TRY has any chance of sustaining a recovery.
Erdogan tariff increase on US cars, alcohol etc point to doubling down on “economic war” line. Suggests decisive orthodox policy move from #Turkey’s govt to draw line under crisis still unlikely. Normalisation of TR relations w US now also critical to lira crisis resolution.
— Robert Ward (@RobertAlanWard) August 15, 2018
Pound (GBP) Exchange Rates to Remain Unfazed by Rising Inflation Due to Cautious BoE Outlook?
The Pound (GBP) meanwhile is trending narrowly against the rest of its peers this morning, despite an uptick in inflation.
The Office for National Statistics (ONS) reported that UK inflation rose from 2.4% to 2.5% last month, the first upswing in inflationary pressure in the UK since last November.
However markets were left almost completely unfazed by the release, as the slight rise in inflation is not seen as having an impact on the Bank of England’s (BoE) cautious outlook towards further interest rate hikes.
GBP/TRY Exchange Rate Long-Term Forecast: Brexit Concerns May Damage Sterling
Looking a little further ahead, the Pound Turkish Lira (GBP/TRY) exchange rate could face some hurdles in the coming months due to the ongoing uncertainty surrounding Brexit.
With negotiations between the UK and EU currently at an impasse, markets are increasingly fearful that time is running out if Britain is to avoid a worst case scenario of a ‘no-deal’ Brexit, something which is likely to weigh heavily on Sterling sentiment through the tail end of 2018.
Meanwhile barring a major turnabout from President Erdogan regarding his unconventional economic policies it’s looking like the Turkish Lira is likely have a rough time through the remainder of the year.