USD/TRY Flat Amid Strong Factory Activity, Lira Posts Weekly Gain

The Turkish Lira flatlined against its US peer to finish the trading week as disappointing economic data put the brakes on the currency’s rally. But the lira is still poised for a weekly boost against the greenback, with foreign exchange markets remaining bullish on one of last year’s worst-performing currencies. With the central bank putting forward a more consistent and orthodox monetary policy, investors are optimistic about the lira’s future.

According to the Turkish Statistical Institute (TSI), retail sales slumped 4.2% in December, down from the 2% jump in November, snapping a seven-month winning streak. Ankara’s retail trade saw a decline in non-food products and fuel.
On an annualized basis, retail sales rose 0.6%, the weakest year-over-year increase in retail activity since May.
Industrial production surged 9% year-over-year in December, down from 11% in November. The market had penciled in a gain of 8.65%. Turkey reported rising output in manufacturing, mining, utilities, and medium-high technology.
The government also reported a current account deficit of $3.21 billion in December, up from -$3.63 billion in November. Earlier this week, the November unemployment rate came in at 12.9%, up from 12.7% in October.
On Thursday, the central bank reported that foreign exchange reserves climbed to $54.37 billion in the week ending February 5, up from $53.37 billion in the previous week. This marked the third consecutive week that forex reserves have topped $50 billion, and it represents the highest level since June of last year. Despite the steady normalization, the weekly gross forex reserves are way below the $80 billion at the beginning of 2020.
Overall, market analysts have been surprised by how well Ankara is recovering. Timothy Ash, a London-based strategist at BlueBay Asset Management, called it “simply remarkable” in an interview with Bloomberg:

The durability of growth in Turkey is simply remarkable. This comes amid policy tightening and suggests that with a positive output gap, monetary policy settings are still not tight enough for the central bank to meet its target of single digit inflation by year-end.

Meanwhile, the business news network recently projected that Turkey’s gross domestic product (GDP) could have expanded as much as 2.5% in 2020, making it one of the few major economies to record growth amid the COVID-19 pandemic. According to central bank data, much of the expansion occurred in the final quarter of last year: 2.7%.
The USD/TRY currency pair dipped 0.02% to 7.0234, from an opening of 7.0233, at 16:00 GMT on Friday. The EUR/TRY slipped 0.09% to 8.5170, from an opening of 8.5212.
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Original from: www.earnforex.com