The Euro to Turkish Lira (EUR/TRY) exchange rate was nearing a weekly-high on Tuesday afternoon.
Although Turkish inflation cooled slightly in February on a monthly basis, yearly inflation grew; moving away from the target set by the Central Bank of the Republic of Turkey (TCMB). This will limit the options for the central bank in terms of rate cutting and its effectiveness. This caused the Lira to slump versus nearly all of its major peers.
The Euro, meanwhile, softened versus many of its most traded currency rivals. This is as a result of anxieties that the Greek bailout extension only delayed the issue, rather than resolved it. Mixed results from domestic data have had minimal impact on Euro movement.
The Euro to Turkish Lira (EUR/TRY) exchange rate is currently trending in the region of 2.8261.
Euro (EUR) Exchange Rate Trending Lower despite Better-than-Expected German Retail Sales
The shared currency softened on Tuesday after European Commission Vice President Valdis Dombrovskis stated that he believes Greece will require another bailout deal once the current program expires.
‘The agreement reached last week is just a delay to finding a more durable solution,’ said Patrick Jacq, a senior fixed-income strategist at BNP Paribas SA in Paris. ‘In terms of market impact, this just prevents yields from rising further. As long as there is no durable agreement and a decision when it comes to debt management, it makes sense to see yields remaining relatively elevated.’
The Euro slide was somewhat slowed, however, after German sales data eclipsed expectations. German Retail Sales came in at 5.3% on the year, decidedly higher than the median market forecast of only a 3.0% increase. This data was less impactful, however, after Eurozone producer price data declined on both a yearly and a monthly basis.
The Euro to Turkish Lira (EUR/TRY) exchange rate dropped to a low of 2.7907.
Turkish Lira (TRY) Exchange Rate Dives as Yearly Inflation Rises
The Turkish Inflation Rate cooled from 1.1% to 0.71% on a monthly basis in February, but the yearly figure rose from 7.24% to 7.55%. This meant inflation moved away from the target set by the TCMB which, in turn, limited what the central bank could do with rate cuts. This has prompted Turkish President Tayyip Erdogan to suggest that the bank needs to ‘shape up’.
‘They need to shape up a bit,’ Erdogan was quoted as saying. ‘If interest rates don’t fall, Turkey can’t invest.’
‘Anyone who defends this (high rates) is at the beck and call of the interest-rate lobby, this is treason against this nation,’ he added.
Euro to Turkish Lira (EUR/TRY) Exchange Rate Forecast to Hold Gains
Given the lack of data to provoke changes, the Euro to Turkish Lira (EUR/TRY) exchange rate is likely to hold gains for the remainder of Tuesday’s trade. Wednesday’s Eurozone Retail Sales data has the potential to provoke EUR/TRY volatility.
The Euro to Turkish Lira (EUR/TRY) exchange rate reached a high today of 2.8360.