Introduction to USD/TRY Exchange Rate
The USD/TRY exchange rate has been on a strong rally after the recent Federal Reserve and Turkish central bank interest rate decisions. As of Friday, the pair was trading at 39.68, just below the year-to-date high of 40.02. This represents a 12% increase from its lowest point in January.
Federal Reserve Interest Decision
The Federal Reserve’s interest rate decision has been a significant factor in the USD/TRY exchange rate’s rally. The bank decided to leave interest rates unchanged between 4.25% and 4.50%, citing concerns about the economy due to Donald Trump’s tariffs. However, officials hinted that the bank may cut interest rates two times this year and four times in the next two years. This decision was in line with expectations but was considered fairly hawkish.
The decision drew criticism from Donald Trump, who has been pushing for interest rate cuts. In a statement, he accused Jerome Powell of costing the US hundreds of billions of dollars in interest payments. Trump also pointed out that Europe has had multiple interest rate cuts since last year.
The Fed expects inflation to continue rising this year as companies adjust to Trump’s tariffs. The tariffs have added a baseline 10% tariff on all imports, with additional tariffs on steel and aluminum.
Turkish Central Bank Decision
The Turkish Central Bank also made an interest rate decision that affected the USD/TRY exchange rate. As expected, the bank decided to leave interest rates unchanged at 46%, where they have been for the past few months. The bank also left the rates corridor between 44.5% and 49% unchanged.
The decision was influenced by recent data showing modest improvements in consumer inflation. The headline consumer price index (CPI) fell to 35.4% in May, its lowest level in four years. Leading indicators suggest that inflation will continue to fall this month, and the economy is expected to perform relatively well this year.
A Bloomberg analyst noted that the central bank’s decision indicated a dovish tilt in its interpretation of recent inflation and activity-related data. The analyst believes that the bank is gearing up for cuts to the policy rate starting in July.
USD/TRY Technical Analysis
The daily chart of the USD/TRY exchange rate shows a strong uptrend, with the pair forming an ascending channel and remaining above the 50-day moving average. This suggests that the bullish trend will continue.
However, the pair has formed a bearish divergence pattern, with the MACD and Relative Strength Index (RSI) drifting downwards. This could indicate a potential bearish breakdown, with the next point to watch being at 39. A move above the resistance at 40 would invalidate the bearish view.
Conclusion
In conclusion, the USD/TRY exchange rate has been influenced by the recent Federal Reserve and Turkish central bank interest rate decisions. The pair’s strong rally is expected to continue, driven by the hawkish Federal Reserve decision and the dovish Turkish Central Bank decision. However, the bearish divergence pattern and geopolitical risks could lead to a bearish breakdown. As such, investors should keep a close eye on the pair’s movement and be prepared for potential fluctuations.
