By Samir El Khoury
Following a transition in Turkey’s monetary policy from unconventional to conventional, the Turkish Central Bank, under the leadership of Governor Hafiza Ghaya Arkan appointed in June 2023, implemented a substantial 31.50% interest rate hike, reaching a total interest rate of 40%.
A few days ago, Arkan stated that the monetary tightening cycle was nearing its end, calling on foreign investors to consider investing in government bonds denominated in Turkish lira. Additionally, Arkan pointed out that the tight monetary policy has started influencing consumer prices, with an expectation that inflation will not drop below 10% before 2026.
In November, the Consumer Price Index on an annual basis stood at 61.98%, slightly below expectations (63%) but higher than the previous reading (61.36%).
Market anticipation is building for the Turkish Central Bank’s upcoming interest rate decision, with expectations suggesting a 250 basis points increase, potentially raising the interest rate to 42.50%.
Technically, the US dollar against the Turkish lira pair is currently recording 29.1240, and the trend is still bullish for this pair.
The Positive Movement Index (DMI+) stands at around 14 points, contrasting with the Negative Movement Index (DMI-), which hovers around 6 points. The substantial gap between these indicators signifies robust purchasing pressures favouring the US dollar against the Turkish lira. Notably, the ADX trend strength index in green registers about 41 points, exceeding 25 points, indicating strong momentum in the upward trend.
Turning to the Stochastic indicator, it currently signals OVERBOUGHT levels, suggesting potential caution in the market.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.
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