By Samir Al Khoury
Despite the Turkish Central Bank’s persistent efforts to curb inflation through successive interest rate hikes, the latest being a surprising 500 basis point increase during its March 21, 2024, meeting, elevating the interest rate from 45% to 50%, the annual Consumer Price Index (CPI) remains alarmingly high. As of yesterday, the CPI for the month of March stood at 68.50%, marking its highest level since November 2022. While this figure fell slightly below expectations (69.10%), it still exceeded the previous reading of 67.07%. Monetary policymakers anticipate inflation to escalate to 70% by May.
The Turkish lira’s decline against the US dollar persists, with the dollar reaching a historic high of 32.4450 liras on Monday of this week. Presently, it is hovering around 32.00 liras per dollar.
Furthermore, the real interest rate remains in negative territory, indicating a substantial disparity between the nominal interest rate and inflation rate. This situation may prompt the Turkish Central Bank to further tighten its monetary policy by implementing additional interest rate hikes to mitigate inflation.
From a technical perspective, the prevailing upward trend for the dollar pair against the Turkish lira appears to continue into the next phase. This is evidenced by the consistent alignment and upward trajectory of the 20-, 50-, and 200-day moving averages. Specifically, the 20-day average surpasses the 50-day average, which in turn exceeds the 200-day average. However, it’s crucial to monitor a significant development: the pair has breached a support level represented by the 20-day moving average, currently standing at 32.1023. The next milestone is to challenge the 50-day average, positioned at 31.3430.
Regarding the Relative Strength Index (RSI), currently at 54 points, it suggests a moderately positive momentum for the dollar pair against the Turkish lira.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.
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