USD/TRY drops from 2-week highs near 5.78 as CBRT delivers

• USD/TRY moves higher to multi-day tops near 5.78.
• CBRT cuts the One-Week Repo rate by 425 bps to 19.75%.
• Turkey Manufacturing Confidence dropped to 98.3 in July.

The Turkish Lira has quickly faded the spike to the vicinity of 5.78 vs. the greenback, with USD/TRY now returning to pre-CBRT levels in the sub-5.7100 zone.

USD/TRY unfazed by dovish CBRT

The pair has rapidly moved to 2-week highs in the proximity of 5.7800 after the Turkish central bank (CBRT) cut rates at today’s meeting, although the bull run was ephemeral.

In fact, newly appointed Governor M.Uysal delivered lower rates at his first event. The central bank reduced the key One-Week Repo Rate by 425 bps to 19.75%, the Late Liquidity Window to 19.75% (from 24%), the Overnight Borrowing Rate to 18.25% (from 22.5%) and the Overnight Lending Rate to 21.25% (from 25.5%).

The CBRT justified its decision in the persistent disinflation process along with the improvement seen in the inflation outlook, all in response to the current tight monetary conditions (until today). The central bank also emphasized the moderate recovery in economic activity, sustained by exports and tourism revenues.

USD/TRY key levels

At the moment the pair is losing 0.17% at 5.6971 and faces the next support at 5.5971 (low Jul.19) followed by 5.5741 (monthly low Jul.4) and then 5.5616 (200-day SMA). On the flip side, a surpass of 5.7727 (high Jul.25) would expose 5.7849 (monthly high Jul.8) and finally 5.8201 (55-day SMA).