- USD/TRY falls to the 5.6200 area, lowest since mid-April.
- Turkey manufacturing PMI improves to 47.9 in June.
- TRY gains ground on shrinking odds of US sanctions.
The Turkish Lira has started the week with strong gains vs. the greenback, dragging USD/TRY to fresh 3-month lows in the 5.6200 region.
USD/TRY sold off after Trump-Erdogan meeting
TRY is trading on positive footing after the meeting between President Trump and Turkey’s R.T.Erdogan at the G-20 summit alleviated concerns over potential US sanctions against the country following the purchase of the Russian defence system.
At the constructive meeting, President Trump talked down the possibility of sanctions, opening the door to other options when comes to the dispute involving the S-400 missile defence system and US-made F-35 jets.
Earlier in the day, Turkey’s manufacturing PMI rebounded to 47.9 during last month (from 45.3). Later in the week, key inflation figures tracked by the CPI and PPI are up on Wednesday seconded by Friday’s Treasury Cash Balance results.
What to look for around TRY
Recently, the CBRT left no doubts it will continue to support the current tight monetary conditions. However, the enduring disinflation process seen in past months opens the door to a potential shift from the central bank to a more accommodative stance, including the palpable chance of rate cuts despite this move on rates appears untimely in the near (and medium) term. In this regard, upcoming inflation figures (Wednesday) should be key. On the positive view, TRY could gain some support along with the rest of the EM FX space in response to the recent shift of the Federal Reserve to a more dovish view on it monetary conditions and the US-China trade truce. Still, the country needs to implement the much-needed structural reforms (announced in April) to bring in more stability and start a serious recovery in both economic activity and credibility.
USD/TRY key levels
At the moment the pair is down 2.53% at 5.6355 and a breakdown of 5.6247 (low Jul.1) would aim for 5.5934 (200-day SMA) and then 5.3918 (78.6% Fibo retracement of the 2019 rally). On the other hand, the next resistance aligns at 5.7935 (21-day SMA) followed by 5.8307 (38.2% Fibo retracement of the 2019 rally) and finally 5.9326 (monthly high Jun.14).
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