TRY/USD Outlook:
Bearish, as the Turkish Lira is below its recent average and near recent lows, facing pressure from key economic factors.
Key drivers:
• Rate gap: The Central Bank of Turkey continues to lower interest rates while the Federal Reserve holds its rates steady, creating disparities in monetary policy.
• Risk/commodities: Oil prices are currently below average, affecting Turkey's economy and currency negatively as it relies heavily on energy imports.
• One macro factor: Recent geopolitical tensions have led to decreased investor confidence in the USD, driving the dollar lower amidst a decline in U.S. asset exposure.
Range:
The TRY/USD is likely to drift within its recent range, with limited volatility expected due to current conditions.
What could change it:
• Upside risk: A significant improvement in Turkey's economic indicators, such as a faster-than-expected recovery in inflation or foreign exchange reserves, could boost the Lira.
• Downside risk: Further deterioration in global investor confidence leading to heightened geopolitical tensions could weigh more heavily on the USD.
