Turkish Lira Extends Recovery Ahead of Key Monetary Policy Meeting

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The Turkish lira is extending its recovery against the US dollar and the euro to close out the trading week, with forex investors getting bullish on the latest economic data. But all eyes will be focused on next week’s critical central bank meeting, where policymakers anticipate officials to leave interest rates unchanged. However, with a president pushing for rate cuts, anything could happen at this crucial policy meeting.

According to the Turkish Statistical Institute (TSI), industrial production surged 66% year-over-year in April, coming higher than the market forecast of 65%. This is also up from the 16.7% jump in March and it represented the 14th consecutive month of gains.

The industrial sector reported growth in durable consumer goods, capital goods, energy products, intermediate goods, and non-durable consumer goods.

On a per-month basis, industrial output slumped 0.9% in April, down from the 0.7% increase in the previous month.

Retail sales soared at an annualized rate of 41.7% in April, up from 19.8% in March. This is was the 11th straight expansion in retail transactions. Ankara’s retail trade saw substantial gains in apparel, telecommunication equipment, electronic goods, and food sales.

Retail transactions recorded a monthly drop of 6.3% in April.

Despite the tourism sector taking a substantial hit so far this year and the economy attempting to rebound to its pre-pandemic levels, Turkey was one of the few countries to reported an expansion. Ankara’s gross domestic product (GDP) climbed 1.8% last year.

That said, next week will be important for Turkey as the central bank’s monetary policy committee is scheduled to hold its June meeting. For now, economists believe the benchmark one-week repo rate will stand at 19%. But President Recep Tayyip Erdogan is demanding rate cuts by August to stimulate the economy, lift investment, and help borrowers. Market analysts had been warning that the new leadership would be slashing rates, but officials have held off on taking action.

The lira is poised for a weekly gain of nearly 4%, paring its year-to-date loss to 11.55%.

The USD/TRY currency pair tumbled 0.58% to 8.3784, from an opening of 8.4274, at 15:57 GMT on Friday. The EUR/TRY plummeted 1.23% to 10.1362, from an opening of 10.2581.

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