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Pound Sterling to Turkish Lira (GBP/TRY) Exchange Rate Slides despite Background Brexit Optimism

November 5, 2018 - Written by Frank Davies

Last week saw the Pound open trading against the Turkish Lira at a level of TRY7.1739 and close lower in the region of TRY7.0420.

Pound Sterling to Turkish Lira Exchange Rate Drops -1% during Otherwise Supportive Trading

The Pound (GBP) has fallen near to a 3-month low against the Turkish Lira (TRY) today, although not through any fault of the UK currency.

This depreciation has instead been caused by the Lira being the stronger currency at present, even though Sterling has risen against other regular currency peers.

Brexit speculation has supported the Pound today, with signs that there could be a UK-wide customs union deal raising GBP trader confidence.

Although reports of such a deal being reached have been downplayed by Downing Street officials, the Pound has still picked up on the news.

Speaking after the story broke in the Sunday Times, a Downing Street spokesman said:

‘The Prime Minister has been clear that we are making good progress on the future relationship and 95% of the withdrawal agreement is now settled and negotiations are ongoing.’

Although a positive development on paper, the concept of the UK remaining under EU customs union terms after Brexit is abhorrent to some as it could mean continued ‘rule-taking’ from the multinational union.

This is perhaps why the story has been officially dismissed, given the potentially explosive domestic reaction if it turns out to be accurate.

Turkish Lira Update: TRY/GBP Exchange Rate Near 3-Month High on Iranian Oil Exemption

The Turkish Lira (TRY) has risen near to its best exchange rate against the Pound (GBP) since early August today, aided by news of a Turkish exemption to US sanctions against Iran.

The (temporary) exemption will allow Turkey to buy oil from Iran without significant penalties, which is a significant boost for the nation.

The US’s re-imposition of sanctions against Iran has unsettled markets today, as the optimism associated with Turkey’s exemption status has shown.

Despite the Lira’s recent advance against the Pound, it is worth mentioning that the TRY/GBP exchange rate is still at a historic low after the sharp decline seen in August 2018.

Pound Sterling to Turkish Lira Exchange Rate Forecast: Are GBP/TRY Gains ahead on UK GDP Data?

The next (and last) UK economic data this week will be a series of ecostats out on Friday, which will cover September’s trade balance and production figures, alongside Q3 GDP growth and business investment stats.

On the plus side, the national trade balance, GDP growth and business investment readings are all expected to print positively, showing a smaller deficit, faster pace of growth and increased level of investment respectively.

Less helpfully, however, current expectations are for a slide in annual and monthly industrial production levels, alongside a drop in yearly manufacturing output.

Given that a majority of Friday’s UK data is tipped to be supportive, the Pound could still trade higher against the Turkish Lira if everything prints as predicted.

Although it isn’t direct Turkish news, the Turkish Lira could still be supported this week by the outcome of Tuesday’s US midterm election.

Consisting of a vote for all seats in the House of Representatives and some seats in the US Senate, the midterms vote could end up devaluing the US Dollar.

Looking at one possible outcome, Ashburton Investments Global Head of Multi-Asset Strategy Mark Appleton says:

‘Should the Democrats make significant gains in the House of Representatives, there is a high possibility recent US dollar strength will abate.

‘Democrats are not proponents of President Donald Trump’s low-tax regime and would likely frustrate plans for further cuts and deregulation, which have been recent drivers of the strong economy and currency.

‘While a weaker US dollar would provide much needed relief for emerging markets, US equities may encounter some headwinds.’

If the US Dollar does weaken as a result of the election, Turkish Lira demand could rise due to increased risk sentiment.
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