USD/TRY Tests 7.43 Despite Turkey Reporting GDP Growth amid Pandemic

The Turkish lira extended its weakness against the US dollar in the middle of the trading week. Despite being one of the few economies to avoid a contraction during the coronavirus pandemic in 2020, the lira has been witnessing a selloff in foreign exchange markets. Inflation continues to be a significant worry for investors.

According to the Turkish Statistical Institute (TSI), the inflation rate surged 15.61% year-over-year in February, higher than the market forecast of 15.39%. This is also up from 14.97% in January, and it represented the highest level since July 2019 amid high transportation, food, and health care costs.
On a monthly basis, the consumer price index (CPI) advanced 0.91% last month, down from 1.68% in the previous month. The market had penciled in a boost of 0.7%.
Producer prices eased in February, rising just 1.22%. This is down from the 2.66% spike in January. On an annualized basis, the producer price index (PPI) increased 27.09%.
The main story coming out of Ankara is that the gross domestic product (GDP) rose 1.7% in the fourth quarter, allowing the country to witness 1.8% growth in 2020, double the expansion from 2019. As a result, Turkey emerged as the sole emerging market and the only G20 countries, except China, to post an expansion amid the COVID-19 public health crisis.
The emerging-market posted growth in agriculture, construction, real estate, finance, industry, and services. But with the government now concentrating on price stability and policy tightening, could the Ministry of Finance and central bank threaten the nation’s gains?
That said, financial analysts are noting that Turkey’s growth occurred as cheap lending contributed to the lira’s collapse and pushed inflation to 15%. The employment situation also deteriorated.
On Monday, the Istanbul Chamber of Industry Turkey manufacturing purchasing managers’ index (PMI) slumped to 51.7 in February, down from a six-month high of 54.4 in January — anything above 50 indicates expansion. The reading highlighted an increase in new export orders, production growth, and demand.
Turkey has ostensibly taken control of the coronavirus pandemic, with the seven-day average falling to below 10,000. However, health officials are monitoring a slight uptick in new infections as confirmed cases have returned to a three-month high. In total, Turkey has reported 2.72 million cases, with a death toll of nearly 29,000.
The USD/TRY currency pair spiked 1.05% to 7.4291, from an opening of 7.3545, at 11:56 GMT on Wednesday. The EUR/TRY climbed 0.05% to 8.8888, from an opening of 8.8928.
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Original from: www.earnforex.com