Results of the presidential elections in Türkiye, USD / TL:
Trade Smart – Subscribe to the DailyFX newsletter
Receive timely and compelling market commentary from the DailyFX team
Subscribe to the newsletter
Read more: EUR/USD and GBP/USD look to rebound on Monday’s liquidity drop after US debt deal
Türkiye saw Recep Tayyip Erdogan re-elected in a run-off on Sunday. The result would see Erdoğan’s rule extend into the third decade as the president stated that “it is time to put aside discussions and conflicts and focus on our national goals and dreams.”
The results of Turkey’s Supreme Electoral Council on Sunday showed Erdogan winning with 52.14% of the vote. The president further pledged that the government’s main priority will be combating inflation and healing wounds as the country is still recovering from February’s devastating earthquake. Erdogan received congratulatory messages from both US President Joe Biden and his Russian counterpart, Vladimir Putining, among a host of other foreign leaders.
According to Asli Aydintasbas, a visiting fellow at the Brookings Institution, the findings point to a divided country as both camps envision a different future for Turkey. Other analysts pointed to Erdoğan’s personality as a key factor in the victory with Hakan Akbas, senior adviser at Albright Stonebridge Group, saying, “I think a big part of it is Erdoğan’s cult-like personality. He is a great orator and his messages are simple yet inspire confidence in his constituents.” Either way, Erdogan is here to stay at least for the time being as Turkey faces a host of economic challenges as it moves forward.
Erdogan supporters in Bursa
Source: Sergen Sezgin / Anadolu Agency
Economic Outlook and Election Implications
Turkish inflation has been the main concern over the past 24 months as I discussed in my article on the Turkish Lira on May 16th. The issue of inflation and the high cost of living played a major role in the elections that Erdoğan made a point of addressing. after winning.
President Erdoğan made it clear that solving the inflation dilemma is not difficult because he is looking forward to eliminating the problem arising from rising prices and compensating for welfare losses. Erdogan came under increasing pressure in the run-up to the elections as the current monetary policy path to keep rates low and supportive of fiscal conditions while emphasizing alternative policy tools and aligning all policy tools with the goals of “Liraisation”. Many have blamed Erdogan’s policy for the unsustainable rate of inflation as well as the subsequent depreciation of the lira over the past 20 months or so (from September 2021).
The central bank faces the difficult task of keeping the lira stable after the elections as any hope for a monetary policy pivot may begin to fade. This seems evident if one looks at the reaction of the USD/TL pair in early trading on Monday, as it once again climbed above the 20.0000 mark.
Recommended by Zain Fouda
Traits of successful traders
Technical outlook and final thoughts
Looking at the bigger picture, volatility is expected to remain high over the coming days. USDTRY continues to rally with little analysis in the way of price action as the movements have been very sudden and volatile.
An agreement on the US debt ceiling could impede further upside in USD/TRY in the short term, but we also saw some hawkish re-pricing of prospects for a rate hike by the Fed moving forward. This may keep the US dollar supported even though its safe-haven appeal has waned in the aftermath of the debt ceiling deal.
The lira is largely expected to remain weak unless President Erdogan announces some form or possible shift in monetary policy. On the US dollar side, it will be interesting to see the reaction once the markets peak back tomorrow after the bank holiday. Continued US dollar strength may push the lira away from the psychological level of 20.0000 and continue to reach new highs.
Alternatively, any push down from here could find support at the 50-day moving average around 19.44 with the 100- and 200-day moving averages resting at 19.1500 and 18.8300 respectively.
USD/TRY Daily Chart – May 29, 2023
Source: TradingView
Written by: Zain Fouda, market writer for DailyFX.com
Connect with Zain and follow her on Twitter: @tweet