Commerzbank reports that the Turkish central bank kept policy unchanged and relied on foreign exchange intervention and ad hoc liquidity tightening rather than raising interest rates. It says this decision followed a meeting where the bank argued that fundamentals were improving and that recent geopolitical events were external disturbances to be monitored.
The bank says disinflation has stalled, inflation expectations are rising, reserves are falling, and market scepticism is increasing. It adds that core inflation momentum remains high and that the earlier improvement in the current account has started to reverse after policy was eased.
Commerzbank expects renewed pressure on the lira and a faster pace of depreciation. It notes that the annualised rate of depreciation since the beginning of April is 47%.
It forecasts USD/TRY at 55.0 by year-end. This compares with market expectations of around 52.0.
Looking back at the analysis from 2025, we can see that the forecast for significant lira weakness was correct. The central bank’s decision at that time to avoid rate hikes in favor of intervention set the stage for a predictable slide in the currency. By the end of 2025, USD/TRY had indeed surpassed the 54.0 level as foreign reserves dwindled and inflation expectations became unanchored.
This history is important because the underlying dynamics have not fundamentally changed. Official data from March 2026 shows annual inflation is still running at a concerning 45%, well above the central bank’s target, despite recent policy tweaks. This persistence shows that the market remains skeptical of the authorities’ commitment to truly tight monetary policy, a sentiment we also observed back in 2025.
Given this environment, traders should anticipate continued pressure on the lira in the coming weeks. The pattern of policy inaction followed by currency depreciation is a well-established one. This suggests that any periods of lira stability are likely to be temporary and driven by short-term interventions rather than a sustainable shift in fundamentals.
For derivative traders, this outlook supports strategies that profit from a rising USD/TRY. Buying USD/TRY call options is a direct way to position for further lira weakness while clearly defining your maximum risk. These options become more valuable as the exchange rate increases, providing upside exposure to the ongoing trend.
It is also wise to be cautious of the high costs of holding these positions, known as negative carry, due to the interest rate difference between the two currencies. Therefore, carefully timing entries and using option structures that mitigate time decay could be advantageous. Monitoring the central bank’s foreign reserve levels will be a key indicator for the timing and intensity of the next major move.
