Yesterday, the Turkish Central Bank reduced interest rates by 250 basis points, from 47.50% to 45.00%, in line with market expectations. This marks the second rate cut of the year, following an initial reduction of 50 basis points. There are expectations for further rate cuts in the coming period, especially with President Erdogan’s pledge that this will occur.
Today, the exchange rate of the US dollar against the Turkish lira reached 35.6976, the highest level ever recorded. The rate is currently hovering around 35.6900 lira per dollar. Since the beginning of the year, the dollar has risen against the lira by about 1%.
Recent Turkish economic data shows signs of weakness, as:
- The Consumer Price Index (CPI) slowed year-on-year to 44.38% in December, which was lower than expected (45.20%) and the previous reading (47.09%).
- The Producer Price Index (PPI) fell year-on-year to 28.52% in December, also lower than the previous reading (29.47%).
- The Industrial Production Index showed a month-on-month slowdown in November, with growth of only 1.00%, lower than the previous month’s growth of 4.10%.
- The government budget posted a deficit of 829.20 billion lira in December, significantly higher than the previous reading (-16.65 billion lira).
From a technical perspective, the trend for the USD/TRY pair appears to be bullish in the near term, with strong upward momentum.
The Relative Strength Index (RSI) stands at 70, which is in the overbought zone.
Additionally, the moving averages for the 20, 50, and 200-day periods are aligned in an upward direction, with the 20-day moving average crossing above the 50-day, and the 50-day crossing above the 200-day.
Moreover, a bullish crossover occurred two days ago between the MACD (blue line) and the Signal Line (orange line), further indicating the bullish momentum for the USD/TRY pair.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice. All trading involves risk.