By Samir Al Khoury,

Yesterday, the Central Bank of Turkey kept interest rates unchanged at 50% for the fifth consecutive month, aligning with analysts’ expectations. Despite a decline in the consumer price index (CPI) on an annual basis in July—falling to 61.78%, below expectations of 62.10% and the previous reading of 71.60%—the index remains significantly above the Turkish central bank’s inflation target of 14%. Additionally, real interest rates are still negative, indicating a substantial gap between nominal interest rates and the inflation rate. This may compel the Turkish central bank to maintain its tight monetary policy, keeping interest rates unchanged for an extended period to curb inflation.

Recent Turkish economic data reveals ongoing weakness in the economy:

• The unemployment rate rose to 9.2% in July, exceeding expectations of 8.2% and the previous reading of 8.5%.

• The manufacturing PMI dropped to 47.2 in July, down from the previous reading of 47.9.

• The industrial production index fell by 17.2% in June, compared to a previous decline of 22.9%.

The USD/TRY pair continues its upward trajectory, reaching a new record high of 33.9449 today. This positive momentum appears likely to persist in the near term, with the USD/TRY having gained approximately 15% since the beginning of the year. The pair is currently hovering around 33.90.

From a technical standpoint, the USD/TRY pair seems poised to continue its uptrend in the coming period, supported by strong momentum. The Relative Strength Index (RSI) is currently at 80 points, indicating strong bullish momentum. The positive directional movement index (DMI+) is recording around 19 points, while the negative directional movement index (DMI-) stands at approximately 4 points, highlighting a significant gap between the two indicators. This suggests strong selling pressure on the Turkish lira against the dollar. Furthermore, the Average Directional Index (ADX) is at around 41 points—well above the threshold of 25 points—indicating that the upward momentum of the USD/TRY pair is robust.

Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.

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