The Pound Sterling to Turkish Lira (GBP/TRY) exchange rate climbed by over 3.0% on Monday afternoon.
After a report from the Confederation of British Industry (CBI) slashed UK growth expectations, the Pound softened versus its major peers. CBI stated that pressures from the EU referendum and the potential Greek exit from the Eurozone will weigh heavily on UK economic growth. ‘Risks to UK growth are tilted to the downside. A messy resolution of the Greek crisis could spark financial market and exchange rate volatility which could spill over into the real economy,’ the CBI said in its forecast. Additional problems for British economic progress are continued weak productivity. ‘While we are seeing a strong domestic picture, cracking the productivity conundrum would really help cement the recovery,’ said CBI director of economics Rain Newton-Smith.
With a complete absence of British data on Monday to provoke changes, the Pound is likely to continue trending lower versus its major peers. The Pound Sterling to Turkish Lira (GBP/TRY) is currently trending in the region of 4.2197.
Despite the CBI report, the Pound advanced significantly against the Lira thanks to uncertainty regarding the Turkish general election. President Recep Tayyip Erdoğan of the AKP party failed to win a majority decision which has opened up the prospect of either a coalition or a fresh poll. The Kurdish minority have been given a much stronger voice since the result after the leftist party HDP managed to break through the 10% threshold. Any hopes for a coalition have been dashed however, after both AKP and HDP have shown no sign of wishing to enter into a coalition. ‘We will not form a coalition with the AKP. We stand behind our words. We will be in parliament as a strong opposition,’ Selahattin Demirtas, co-chair of the leftist HDP, said in a press conference in Istanbul on Sunday night.
Burhan Kuzu, the AK party deputy and head of the parliamentary constitution commission, said snap elections were inevitable. ‘No government will emerge from this scenario. Not even a coalition,’ he told BBC Türkçe. ‘Early elections look inevitable.’ He added that the election results reflected the weakness of the parliamentary system. ‘The parliamentary system is a curse for the whole world. In Turkey only majority governments ever worked, coalitions always destroyed it.’ He said that the only solution would be an executive presidency.
Turkish economic data printed relatively positively on Monday but political uncertainty has overshadowed the results. On the year, Industrial Production bettered the median market forecast 3.3% increase in April, with the actual results reaching 3.8%. Retail Sales bettered the market consensus on an annual basis in April, but the month score just missed estimates.
The Pound Sterling to Turkish Lira (GBP/TRY) exchange rate was trending within the region of 4.1940 – 4.2879.