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USDTRY: Turkey’s Central Bank Cuts Rate to 11.25% – Negative Real Rates

USDTRY Turkish lira
USDTRY Turkish lira

USDTRY slumps to 5.85 as the CBRT cuts one-week repo rate at 11.25%, below expectations of 11.5%. The 75 basis point cut today is the smallest rate cut since the beginning of the easing cycle. That is the fifth consecutive interest rate cut since July 2019. In December, the central bank cut its repo rate by 200 basis points to 12%, down from 14%. With inflation at 11.9% in Turkey the real interest rate now is negative.

Economic recovery in Turkey is expected to be sustained with the help of the ongoing disinflation process and improvement in financial conditions.

The recent economic data indicate that recovery in economic activity continues. However, investment demand remains weak.  Turkey’s Central Bank will continue to use all available tools in pursuit of the price stability and financial stability objectives.

Turkeys central bank moves are in line with president Erdogan view that interest rates are too high and must come down to single digits in 2020.

Read our Best Trading Ideas for 2020.

USDTRY Technical Analysis Outlook

USDTRY gives up 0.44% at 5.8498 hitting fresh monthly lows as traders see a pause in the easing cYcle by CBRT. The pair continues the correction from seven-month highs at 5.9773.

On the downside, immediate support for the pair stands at 5.8461 the daily low. If the pair pierce that level the next critical support area is at 5.8183 the 50-day moving average. Bears in order to take control will seek a break below the 100-day moving average at 5.7890.

On the upside, first resistance for USDTRY pair stands at 5.8894 the daily top. Next level to watch on the upside for the bulls is at 5.9147 the high from January 9th. While the next supply zone awaits at 5.9758 the seven-month highs.