USD/TRY Tests 7.9 as US Sanctions Outweigh Positive Economic Data

The Turkish lira is weakening against the US dollar to kick off the trading week. The lira is coming under pressure after the US government slapped sanctions on Turkey over its purchase of Russian S-400 missiles. The economic and geopolitical fallout over sanctions triggered consternation in foreign exchange markets that positive economic data were not enough to support the lira.

On Friday, Reuters reported that Washington was scheduled to announce new sanctions on Ankara in the coming days, targeting Turkey’s defense industry. On Monday, the White House announced that it would be imposing sanctions on Turkey as officials were perturbed that President Recep Tayyip Erdogan acquired missiles from Russia, arguing that it would be a disrespectful gesture against NATO allies.
President Donald Trump would tap Countering America’s Adversaries Through Sanctions Act (CAATSA) one month before his successor, Joe Biden, is sworn into office.
State Department spokeswoman Morgan Ortagus wrote in an emailed statement to CNBC:

The United States has expressed to the Government of Turkey, at the most senior levels, that the acquisition of Russian military systems such as the S-400 is unacceptable.

Erdogan delivered remarkets to officials from his AK Party, urging US and European politicians to break from the influence of anti-Turkey lobbies.”

For America to get up and confront Turkey with a matter like CAATSA is disrespectful to a very important NATO partner. There are no issues that we cannot solve with dialogue and cooperation.

The lira weakened as much as 3% on the news, adding to its overall 2020 decline of about 25%.
Economic data suggested that Turkey’s recovery is proceeding better than market forecasts.
In October, industrial production advanced 10.2% year-over-year, higher than the median estimate of 9%. The Turkish Statistical Institute reported gains in mining, utilities, manufacturing, and medium-high technology.
Retail sales surged 4.2% in October, up from 3.1% in September. At an annualized rate, retail sales popped 12% in October, up from 8.4% in the previous month. Ankara witnessed increased trade in medical goods, e-commerce, electronics, apparel, and fuel.
While automobile production advanced year-over-year in November, it did slow down sharply. Auto output rose 5.4%, down from 14.1% in October.
On Thursday, the central bank will release the latest foreign exchange reserves data for the week ending December 11. In the previous week, foreign reserves came in at $46.39 billion.
The USD/TRY currency pair rose 0.35% to 7.8891, from an opening of 7.8612, at 16:53 GMT on Tuesday. The EUR/TRY jumped 0.76% to 9.5925, from an opening of 9.5242.
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Original from: www.earnforex.com