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CBRT Interest Rate Preview: Implications for the USD/TRY

The USD/TRY is falling for the second consecutive day ahead of the final CBRT interest rate decision. The weaker US dollar is also contributing to the strength of the Turkish lira. It is trading at 7.6340, which is 11% lower than the YTD high of 8.5681.

What’s ahead: The Turkish Central Bank will deliver its final interest rate decision later today. It will also be the second decision of the new governor, Murat Uysal. Economists believe that the bank will increase interest rate for the second straight month to deal with the rising inflation.

In general, they expect the one-week repo rate to rise from 15.00% to 16.50%. They also see the overnight borrowing rate and lending rate rising to 15% and 17.50%, respectively.

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USD/TRY outlook: If the central bank goes ahead and hikes interest rates, we could see the USD/TRY pair continue falling today. That’s because it will show that the bank is now serious by following the convectional policy approaches. However, if the bank leaves rates unchanged, it could see the pair rebounding.

USD/TRY technical outlook

On the four-hour chart, we see that the USD/TRY pair formed a double-top pattern at 8.00 in November and December. It remains below the 25-day moving average and is forming a bearish pennant pattern. Therefore, for today, we suspect that the pair will break-out lower as bears aim for the next support at 7.50. On the flip side, a move above 7.80 will invalidate this trend.

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USDTRY technical chart

USD/TRY

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