The Turkish Lira is weaker against the Pound this Thursday after the Central Bank of the Republic of Turkey unexpectedly cut its key interest rate (1-week repo auction rate) by 100 bps to 13.0% in a move which has baffled economists. This has given the GBP/TRY currency pair some uplift this Thursday after a consensus of market analysts had predicted the bank would leave rates unchanged.
In explaining its contrarian move on the back of soaring inflation, the CBRT says that the financial conditions stayed supportive enough to preserve the momentum of growth in industrial production and the uptrend in employment at a time of uncertainties surrounding global growth.
The CBRT says that with this rate cut, the interest rate level was now adequate in line with the current outlook. The GBP/TRY is up 0.52% as of writing, as the muted response on the currency pair seems to reflect the market pricing in such dovish surprises.
The emerging bullish flag is a sign of further upside action. The all-time high at 24.2474 is expected to be the completion point of this move. To achieve this, the 22.6092 resistance formed by the previous high of 17 December 2021. must be degraded by the bulls. Any extension of the advance beyond 24.2474 will take the pair into record territory.
However, a decline below the 21.6352 support invalidates the pattern. This would also open the door for potential downside moves that target 20.8701 initially (16 June and 19 July lows) and later 0.4506 (3 June and 15 July lows). Additional targets to the south that become available with a more profound correction include 20.0658 (29 June low) and 19.6676 (10 March high and 19 May low).