The recent outlook for the EUR/TRY exchange rate indicates a complex interplay of factors influencing both currencies. As of now, the euro (EUR) stands at 48.76 TRY, reflecting a slight increase of 1.0% above its three-month average of 48.28, with a stable trading range that has fluctuated from 47.06 to 48.95. The performance of the euro is still closely tied to the movements of the US dollar (USD), particularly due to the broader economic environment and ongoing inflation concerns within the Eurozone.
Recent economic data from the Eurozone suggests a weaker than expected economic momentum, highlighted by a decline in the Composite Purchasing Managers' Index (PMI) to 49.7 in October, indicating a potential contraction in business activities. Furthermore, while third-quarter GDP growth figures exceeded predictions and the European Central Bank (ECB) has held interest rates steady, inflation dynamics remain critical. A marginal moderation in inflation could bolster probability for a rate cut by the ECB next year, thus weighing on the euro.
On the Turkish side, the Turkish lira (TRY) faces significant challenges, particularly with inflation surging unexpectedly to 33.3% in September, driven by escalating costs across essential sectors like food and housing. This inflation spike poses a direct challenge to the Turkish central bank and its recent monetary policies. Additionally, the termination of Turkey’s foreign exchange-protected deposit scheme last month introduces further market uncertainty, as this scheme had previously provided some stability to the TRY.
Turkey's economic forecast does show signs of hope, as the European Bank for Reconstruction and Development has increased GDP growth expectations from 2.8% to 3.1% for 2025, albeit highlighting potential political and market risks that may impact stability.
In global energy markets, oil prices have been somewhat volatile. Currently, oil is trading at around 65.07 USD, which is 1.7% below its three-month average of 66.21. Given that Turkey is heavily reliant on energy imports, fluctuations in oil prices could further affect the TRY through their impact on trade balance and inflation.
Experts note that any sustained geopolitical tensions, particularly revolving around the situation in Ukraine and Turkey's economic intricacies, will continue to influence investor sentiment toward the euro and lira. The interaction between ECB policies, inflation trends, and geopolitical stability in the Eurozone and Turkey will be crucial in predicting the future trajectory of the EUR/TRY exchange rate.
