EUR/TRY Outlook:
The EUR/TRY is currently slightly positive but likely to move sideways, trading 2.2% above its 90-day average, yet lacking a clear driver for further momentum. The rate is near the mid-range of its recent fluctuations, suggesting potential stability ahead.
Key drivers:
• Rate gap: The European Central Bank's cautious approach contrasts with Turkey’s recent aggressive interest rate cuts, creating a widening differential that supports the euro.
• Risk/commodities: With oil prices at recent highs, the cost of imports for Turkey continues to rise, pressuring the Turkish Lira as energy costs are a significant expense for the economy.
• One macro factor: The Turkish lira hit a record low against the USD, reflecting ongoing concerns about inflation management and economic stability in Turkey.
Range:
Expect the EUR/TRY to remain stable within its recent 3-month range, likely holding around current levels without significant movement.
What could change it:
• Upside risk: A positive shift in Eurozone economic data could strengthen the euro against the lira.
• Downside risk: If inflation in Turkey continues to decline rapidly, it may encourage further monetary easing and weaken the lira.
