Turkey is an important country located in Asia and Europe. It has a population of more than 79 million people and a GDP of more than $850 billion. The country’s biggest exports are machinery and appliances.
After decades of stability, the main concern among traders has been on the country’s president, Recep Erdogan. The concerns started after a failed coup attempt in the country. After the failed coup attempt, the country came under a state of emergency. In this state, the president can make decisions by bypassing the parliament. He also conducted a referendum that would give him more power.
As all this was happening, the Turkish Lira was hurting. Its value has continued to decline, falling by more than 50%. In a recent interview with Bloomberg, Erdogan pledged to take a bigger role on monetary policy decisions. In this, he meant that he would sustain a period of low interest rates in the country. This led to a sharp decline in the Lira. It was then saved by the central bank governor who made an important rate increase. In most countries, monetary policy decisions are left to an independent central bank.
After yesterday’s election, the Lira strengthened against the dollar. The pair has now reached 4.6057. The price is in line with the 50% Fibonacci Retracement level as shown below. If the pair crosses this line, there is a possibility that it will test the 4.5787 level.
As Erdogan becomes more emboldened, there is a likelihood that he will try to influence the decisions of the central bank. This could happen in the person he appoints as the central bank governor. This will increase the pressure on the lira.
