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Pound Sterling to Turkish Lira Exchange Rate Struggles to Hold as Lira Continues Gradual Recovery

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Pound to Turkish Lira Exchange Rate Lower Despite Market Risk-Aversion

Investors have had no reason to buy a limp Pound (GBP) towards the end of the year, leaving the Pound Sterling to Turkish Lira (GBP/TRY) exchange rate edging lower as the Turkish Lira (TRY) continues its gradual recovery attempt.

Since opening this week at the level of 6.71, GBP/TRY briefly climbed before sliding lower towards the end of the week.

On Friday morning, GBP/TRY hit a weekly low of 6.65. However, this was still higher than December’s lowest levels. At the time of writing, GBP/TRY trended closer to the level of 6.68.

This month has seen concerns about slowing global growth and resilient demand for safe haven currencies dampen market demand for risky emerging market currencies like the Turkish Lira.

The Lira has found some late-week support thanks to some decent Turkish data as the currency continues to recover from its 2018 plummet. However, market risk-aversion and concerns about Turkey’s economy mean it remains under pressure.

Pound (GBP) Exchange Rates Pressured by Brexit, Retail Sales Fears

UK political developments and Brexit uncertainties contributed to a highly bearish December for the Pound. The British currency’s outlook is shrouded in uncertainties and this is keeping it tumbling towards the end of the year versus many other currencies.

With markets quieter this week amid the festive holiday period, a lack of developments in UK economic or political news meant the Pound remained limp and unappealing.

Investors are still anxious about how the Brexit process will unfold in the coming months. UK Prime Minister Theresa May’s Brexit deal still appears too unpopular to pass through UK Parliament, making investors anxious that a ‘no-deal Brexit’ is possible.

Towards the end of the week, news of signs that UK high street retail activity was weaker than expected during the holiday period also weighed on Sterling.

On Friday, it was reported that UK music retail chain HMV was entering administration for the second time in six years.

According to Richard Lim, Chief Executive at Retail Economics, there may be more troubles to come for the UK retail sector outlook:

‘Set against the backdrop of turbulent political and economic undercurrents, this perfect storm of pressures has intensified into a year of distress for the industry. While it is too early to assess the relative success of Christmas trading, it’s clear that consumer confidence is fragile and shoppers’ propensity to spend is weak.’

Turkish Lira (TRY) Exchange Rate Strength Limited by Risk-Aversion

The Turkish Lira, which has been gradually edging higher versus major currencies like the Pound since it plummeted in August, has seen limited demand in recent weeks.

Signs that long-lasting US-China trade tensions may be de-escalating made investors less hesitant to buy risky emerging market currencies like the Turkish Lira.

However other factors, such as signs of slowing global growth, have dampened that risk-sentiment and kept investors eager to buy safer currencies instead.

US-China trade tensions persist despite hopes that things will improve, and there are signs that China’s economy is also slowing.

This has limited the Turkish Lira’s strength.

Turkish data published this week has also had a limited impact on the Lira. While Business confidence and economic confidence data from December were decent, the prints fell short of some forecasts.

Pound to Turkish Lira (GBP/TRY) Exchange Rate Investors Anticipate Turkish Inflation Data

The Pound to Turkish Lira (GBP/TRY) exchange rate could see further losses next week if upcoming Turkish data impresses investors.

Surging inflation and concerns that Turkey was not handling the issue were among the causes of a perceived Turkish currency crisis in August 2018.

As a result, investors are more likely to comfortably buy the Turkish Lira if next week’s Turkish inflation data from December weakens as expected.

UK data will be published next week too, including UK PMI results for December from Markit. The data will give investors a better idea of how Britain’s economy is faring amid worsening Brexit uncertainties and falling consumer confidence.

The data is unlikely to support the Pound, so the Pound to Turkish Lira (GBP/TRY) exchange rate outlook is likely to remain weak until there is some kind of solid development regarding the Brexit process.