Pound To Lira Outlook – One Month Best British Pound Currency Rates Vs Turkish Lira For UK Holidaymakers – Exchange Rates UK

The British Pound to Turkish Lira (GBP/TRY) exchange rate trimmed gains ahead of the weekend after striking a one-month best on Thursday with the UK£ boosted by hopes of a backstop-based Brexit breakthrough while the Lira remained on the back-foot following the latest CBRT developments.

At the time of writing, Sterling was last seen trading at TRY 7.0479, down 0.5% on the day but finding support on the key 7.0 psychological level to trade up 3.94% on the week reflecting the largest weekly gain in the cross since March.

British Pound to Dollar exchange rate

Pound Sterling (GBP) Exchange Rates Lifted by Brexit Backstop Hopes but Fresh Brexiteer Demands Undermine Optimism

For those tracking the Brexit saga – and that should be everyone with any interest in Sterling exchange rates – recent developments spurred a marked turnaround for the Brexit-blighted Pound Sterling with potential avenues to avoiding no-deal opening up and offering markets a glimmer of hope that the worst case scenario can be averted.

Following the unveiling of a Labour-led plan to avoid no-deal – via a vote of no confidence and a request to extend the Article 50 deadline – this week saw arch-Brexiteer PM Johnson provide the impetus for further Sterling appreciation with his request to revisit the backstop component of his predecessors EU Withdrawal Agreement finding some traction with EU leaders.

Meetings between PM Johnson, German Chancellor Merkel and French president Macron this week left markets clinging to hopes that no-deal can be staved off with EU leaders placing a 30-day time-limit for alternative proposals to replace the controversial backstop arrangements.

Coming sessions will likely focus on government efforts to provide tangible, practical solutions which meet the EU’s requirements, but given the time-frame involved and the chasm between UK and EU officials (in terms of disparity on Brexit objectives, not the English Channel) analysts cautioned over chasing GBP higher.

“We are not really any closer to finding a solution. Macron has met Johnson with scepticism. The markets are biased towards the optimistic view because everyone still thinks that given the negative consequences of no-deal Brexit for both sides a solution will be found,” wrote Commerzbank strategist, Esther Reichelt.

Moreover, just a day after EU leaders said they would consider alternative solutions to the backstop, a number of Tory lawmakers have put forth their own lists of demands for changes to the deal, potentially undermining efforts to reach a deal before talks even begin.

“I’d argue for contingency on the money. I’d argue for tighter limits, timetable limits, sunset clauses on ECJ and things like that. I’d have a small shopping list,” said former Brexit secretary David Davis, joining a number of Conservative MPs calling for further changes.

With the list of demands growing and less than 30 days to come up with viable alternatives (following 2+ years of talks), analysts were reserving optimism, forecasting the Pound’s rally to fade.

“After almost three years of negotiations, no viable alternative solutions to the Irish backstop has been found. We doubt a solution can materialise in 30 days in time for Parliamentary approval in the EU and U.K. before the end of October. As a result, we expect the GBP to decline as the 31 October deadline approaches,” wrote CBD FX strategist, Kim Mundy.

Turning to the G7 summit taking place this weekend, investors will be on the look-out for any fresh Brexit developments while any talk of a US-UK trade deal will also be on the radar and while the UK£ is riding high at the moment, analysts expect rallies to fade as we inch closer to the Halloween Article 50 deadline.

“This weekend’s G7 meeting in France may provide some hints about the future of the UK’s international relationships, but we remain quite reticent about a new deal with the EU being agreed before the 31 October deadline and expect GBP rallies to be short-lived,” wrote ING FX strategist, Francesco Pesole.

Turkish Lira Under Pressure on Lower Required Reserve limits

The Lira’s struggled over recent sessions with the decision from the Central Bank of the Republic of Turkey (CBRT) policymakers to lower required reserve limits weighing heavily on sentiment with investors concerned over the potential for rapid loan growth.

“The mode and perspective for the Turkish market changed after the central bank’s move on required reserves,” one FX trader told Reuters.

Following the recent (brief) inversion of the US 2-Y/10-Y yield curve, and based on price analysis for the previous five inverted UST yield curves, Nordea analysts expect the Lira to face considerable headwinds in the months to come with the TRY (and Colombian Peso (COP)) traditionally the biggest post-inversion losers.

Above: Turkish Lira Pound Sterling (TRY/USD) Exchange Rate Post UST Inversion

Also weighing on sentiment was the escalation in Turkey-Syria relations after a Syrian airstrike on a Turkish military convoy in northwest Syria on Monday killed three civilians, setting the stage for a potential armed conflict. While Ankara-Washington tensions have eased somewhat, with US and Turkish armed forces set to establish a ‘safe-zone’ on the Turkey-Syria border, the threat of military conflict on Turkey’s doorstep doesn’t bode well for investor confidence.

For the Lira while there are a number of factors curbing enthusiasm for the Turkish currency – lower RRR, Turkey-Syria tension, risk-off – the ‘hunt for yield’ could offer the TRY a modicum of support with domestic rates still look attractive in spite despite hefty rate cuts from the CBRT.