- USD/TRY picks up bids to refresh two-week high, consolidating late August slump.
- US Dollar Index (DXY) retreats from multi-day high amid market’s preparations for this week’s US data.
- Concerns about US soft landing contrasts with economic fears surroudning Türkiye to favor Turkish Lira bears.
- US data, risk catalysts eyed for clear directions, CBRT gains less importance of late.
USD/TRY remains on the front foot around 26.81 amid early Wednesday morning in Europe. In doing so, the Turkish Lira (TRY) pair ignores the latest retreat of the US Dollar amid fears of witnessing more hardships for Türkiye, which contrasts to the upbeat economic expectations for the US.
Rainstorms and floods appear the latest worries for Türkiye’s economic watchers as the nation struggles to tame the previous damages done through the heavy inflation, higher rates and geopolitical calamities in Ankara.
“Fierce rainstorms have battered neighboring Greece, Türkiye and Bulgaria, triggering flooding that caused at least seven deaths, nine per the latest counts,” said The Guardian.
Earlier in the week, Turkish Consumer Price Index (CPI) jumped 9.09% MoM and 58.94% YoY for July while the Producer Price Index eased to 5.89% MoM despite rising to 49.1% on the yearly basis for the said month. With the overall higher inflation, the Central Bank of the Republic of Türkiye’s (CBRT) is pushed towards higher rates even as the actions haven’t been received properly during the last few rate increases.
Elsewhere, the US Dollar Index (DXY) traces a pullback in the US Treasury bond yields to print mild losses at the highest level since March 15, marked the previous day, as it drops to 104.70 at the latest. That said, the benchmark US 10-year Treasury bond yields retreated to 4.25% after rising eight basis points (bps) to 4.26% the previous day.
It should be observed that the Greenback jumped the most in five weeks on the upbeat details of the US Factory Orders, as well as comments from the Federal Reserve (Fed) officials. On Tuesday, the US Factory Orders for July dropped to the lowest since mid-2020 while posting -2.1% MoM figures versus -0.1% expectations and 2.3% previous growth. However, the orders excluding transport rose 0.8% MoM, Shipments of goods stayed firmer and inventories marked the first increase in three months. That said, Federal Reserve (Fed) Governor Christopher Waller’s defense of hawkish monetary policy during a CNBC interview and Cleveland Federal Reserve President Loretta Mester’s rejection of rate cuts favor the US Dollar bulls.
Additionally, fears about China’s recession, despite likely stimulus for China’s real estate sector, per the Chinese media, seem to have fueled the property shares, especially backed by Country Garden’s avoidance of default, but have failed to tame the US Dollar of late. The same appears as the key catalyst challenging the market’s previous risk-off mood and testing the USD/TRY bulls.
Looking forward, US ISM Services PMI and the second-tier activity, as well as employment, clues will be eyed for clear directions of the USD/TRY pair. Above all, the divergence between the US and the Turkiye’s growth matrix keeps the pair buyers hopeful.
A daily closing beyond the 21-DMA hurdle of around 26.80 becomes necessary for the USD/TRY bulls to challenge the yearly high marked during late August, around 27.23.