- USD/TRY bounces off recent lows near 5.8200.
- Turkey manufacturing PMI dropped to 45.3 from 46.8 in May.
- Inflation figures ticked lower to 18.71% YoY during May.
The Turkish Lira is giving away part of its recent strong gains and is now pushing USD/TRY to fresh daily tops near the 5.90 level.
USD/TRY higher post-CPI figures
After six consecutive daily pullbacks, the pair is now picking up some upside momentum in tandem with a better tone around the greenback and following lower-than-expected inflation figures in Turkey.
In fact, TRY is fading part of the recent appreciation after inflation figures tracked by the CPI showed consumer prices rose at an annualized 18.71% in May and 0.95% inter-month, both prints missing consensus.
In the same line, Producer Prices rose 28.71% from a year earlier and 2.67% inter-month, coming down from the previous readings. Also collaborating with today’s offered bias in the Lira, the manufacturing PMI ticked lower to 45.3 during last month.
In the meantime, the pair should keep looking to the US-China/US-Mexico trade concerns and their impact on the EM universe for near term direction, apart from the local agenda, which includes the municipal elections in Istanbul on June 23 as the next risk event.
What to look for around TRY
The upside momentum around the Turkish currency appears to be taking a breather at the beginning of the week following the positive streak to the vicinity of 5.80 vs. the buck. As usual, trade effervescence should remain as key driver in the EM FX space, while frictions between the AKP and its main opposition party in the run up to the municipal elections in Istanbul are also emerging as another source for Lira volatility albeit on the domestic front. Further out, potential US sanctions following the purchase of the Russian missile defence system keeps lingering over the country as well as sanctions over Iranian crude oil exports. Additionally, the independence and credibility of the CBRT should remain under the microscope against the omnipresent conflict between the government and the bank’s authorities. Recently, another focus of attention has emerged after the IMF urged the government to start implementing reforms aimed to bring back stability to the country’s fundamentals.
USD/TRY key levels
At the moment the pair is gaining 0.86% at 5.8862 and faces immediate hurdle at 6.0377 (21-day SMA) followed by 6.1516 (high May 23) and then 6.2457 (2019 high May 9). On the downside, a breach of 5.8196 (low May 31) would open the door to 5.7094 (low Apr.17) and then 5.6517 (200-day SMA).
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