The Pound to Turkish Lira (GBP TRY) exchange rate rose today as investors avoided the emerging-market currency due to economic and political uncertainty.
GBP TRY currently sits around 4.52, up slightly from the day’s opening levels.
The Turkish Lira continues to be the black sheep of the so called ‘fragile five’ of emerging-market currencies as the risks of investing greatly outweighing the gains.
‘We certainly see better value in other emerging market countries, these include Brazil, Russia and Indonesia. . . we are of the view that the political and economic cycles have turned decisively in a favourable direction in all these countries. The same does not hold for Turkey.’
While most emerging-market currencies have been pressured by the election of Donald Trump, the Lira has failed to recover in a similar manner to its peers, with Turkey remaining in a state of emergency following recent terrorist attacks and the attempted coup against President Recep Erdogan and his AK party last year.
The Pound’s gains against the Lira have been muted somewhat today by recent comments from Prime Minister Theresa May, who said in an interview on Sunday that she was not interested in keeping ‘bits of EU membership’.
Investors took this as an indication that the UK government will not seek to retain access to the single market when ‘Brexit’ negotiations are expected begin in March, with the PM also signalling that her main concern in talks was to gain stronger controls over EU immigration.
EU leaders have repeatedly stated that in order to access the single market, Britain would have to be willing to accept freedom of movement.
As German Chancellor, Angela Merkel said today;
‘We also make clear on the other hand that access to the single market can only be possible on the condition of respecting the four basic freedoms. Otherwise one has to talk about limits (of access).’
The increasing likelihood that the British government will pursue a ‘hard Brexit’ is likely to continue to drag on Sterling as markets fear the impact that leaving the single market will have on the UK economy, especially the banking sector as banks could relocate from London to the continent if the City loses its passporting rights.
The GBP TRY exchange rate may rise further on Wednesday with the release of the UK’s latest Production figures for the Manufacturing, Construction and Industrial sectors with rises expected across the board following last week’s bumper PMI readings.
Meanwhile an expected rise in Turkey’s Unemployment rate next week could send the Lira spiralling even further as analysts predict that it will rise from 11.3% in October.
However growing uncertainty over the impact of ‘Brexit’ could see Sterling waver over the next few weeks as markets await the triggering of Article 50 in March.
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