The Pound has dropped heavily against the Turkish Lira today, as continuing weakness in the US elevates demand for higher-risk currencies.
Last week saw the Pound gradually edge lower against the Lira, with that trend continuing as markets reopened following the weekend.
The Pound was in a general state of decline on Monday following the news that Article 50 will be triggered on March 29th. As the last step before Brexit officially begins, the locking-in of this event has weakened the Pound.
This deterioration in Pound demand follows last week’s spike when Bank of England (BoE) official Kristin Forbes unexpectedly voted for a UK interest rate hike.
As the sole dissenter, Forbes justified her decision by citing possible pressure from rising inflation negatively impacting UK consumers, who have recently been dealt a blow with falling wage growth.
The Turkish Lira’s advance against the Pound at the start of the week has also been the result of US Dollar weakness, although Turkish data has also proven supportive.
In the former case, the US Dollar has been damaged by the news that the FBI is investigating Russian links to Donald Trump’s election campaign.
In the latter, Turkish government debt has dropped from 800.2bn to 783.1bn.
This week, Pound/Turkish Lira exchange rate movement may occur as a result of UK inflation on Tuesday, along with UK retail sales figures on Thursday. Looking further ahead, the Pound could tumble when Article 50 is triggered on Wednesday.
The incoming inflation rate stats could improve the Pound Lira exchange rate if annual inflation hits 2.1% as forecast.
Exceeding the BoE’s inflation target of 2.1% is not expected to automatically make a near-term BoE rate hike a possibility, but the Pound could still appreciate on the news. This is because target-exceeding inflation would imply that the BoE would be under added pressure to consider this policy tightening option.
UK retail sales figures may also have a direct positive impact on the Pound if they match forecasts, with gains in consumer spending expected on the month and the year.
Looking further ahead, the Article 50 activation may cause a Pound to Lira crash next week as it will effectively end any chance of the UK staying in the EU.
For incoming Turkish news, the only remaining data releases this week will be Thursday’s consumer confidence score and the Turkish central bank (TCMB) meeting minutes.
Outside of this data, the TRY GBP exchange rate may advance if US home sales figures print poorly on Wednesday and Thursday. The US Dollar may also weaken (to the Lira’s advantage) on Friday, when US durable goods orders are due. These are expected to slow from 1.8% to 1.2% which could leave the Lira in a stronger position by the end of trading on Friday.
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