USD/TRY bulls occupy driver’s seat above 18.00, focus on US data, Jackson Hole speeches

• USD/TRY remains on the front foot around the yearly top, up for the second consecutive day.
• Turkish FinMin Nebati praises CBRT moves while expecting softer inflation.
• Turkish Consumer Confidence improved in August, US data came in mostly downbeat.
• US Durable Goods Orders, Fed Chair Jerome Powell’s speech at Jackson Hole will be crucial

USD/TRY grinds higher past 18.00 for the second consecutive day amid the initial European morning on Wednesday. In doing so, the Turkish lira (TRY) pair fails to cheer the multiple recent efforts by the Central Bank of the Republic of Türkiye (CBRT), as well as hawkish comments from the Turkish Finance Minister (FinMin) Nureddin Nebati. The reason could be linked to the market’s risk-off mood ahead of the key US data/events that underpin the US dollar’s safe-haven demand.

On Tuesday, the CBRT announced a hike in the discount rate on CPI-indexed bonds in the Turkish central bank's collateral system, from 50% to 60%. “The move would make the longer-term fixed-coupon bond more attractive to banks over CPI-indexed bonds,” said Reuters.

It’s worth noting that the CBRT also unveiled new required bond holdings for lenders, per Reuters, which lead higher demand and meant to address the widening gap between the bank's policy rate and lending rates.

While praising the CBRT moves, Turkish Nebati said, “Turkey's annual inflation rate will enter a sharp downward trend as of December due to favorable so-called base effects and the fall will continue throughout 2023,” reported Reuters.

Talking about the data, Turkiye’s Consumer Confidence Index rose to 72.2 versus 68.00 for August but failed to help the USD/TRY bears.

It’s worth noting that the USD/TRY traders also ignored downbeat US data to keep the pair on the bull’s radar. That said, the preliminary readings of the US S&P Global Manufacturing PMI for August eased to 51.3 versus 52.0 expected and 52.2 prior while the Services gauge plunged to 44.1 from 47.3, compared to 49.2 market forecasts. According to S&P Global, the US economy is also in trouble as the Composite PMI shrank to 45, its lowest in 27 months. Furthermore, the US New Home Sales for July dropped to the lowest levels in six years, to 0.511M from 0.585M prior and 0.575M market forecasts. Furthermore, the US Richmond Fed Manufacturing Index for August dropped to -8.0 compared to the 0.0 previous reading.

Recently, Minneapolis Fed President Neel Kashkari mentioned that the biggest fear is that we are misreading underlying inflation dynamics, per Reuters. The policymaker also added that the Fed can relax on rate hikes when compelling evidence of CPI heading toward 2% is seen. Comments from Fed’s Kashkari tamed concerns that Fed Chair Powell would go slow on rate hikes while speaking at the Jackson Hole on Friday, as backed by Goldman Sachs.

Looking forward, the US Durable Goods Orders for July, expected 0.6% versus 2.0% prior, would direct intraday moves of the USD/TRY but major attention will be given to Friday’s speech by Fed Chairman Jerome Powell at the Kansas City Fed’s symposium in Jackson Hole.

Technical analysis

USD/TRY bulls remain on the way to an upward sloping resistance line from early June, around 18.25 unless the sellers successfully break the 18.00 threshold.