In September, Turkey’s Consumer Price Index rose by 3.23%, exceeding the expected increase of 2.6%. This unexpected jump indicates increasing inflation in the Turkish economy for that time. The US ISM Services PMI is expected to decrease slightly, with the market focusing on how the employment index performs. Meanwhile, the USD/INR remains strong despite trade tensions between the US and India, affecting the strength of the Indian Rupee.

Possible Currency Changes

The EUR/GBP pair is approaching the 0.8740 resistance zone, suggesting potential changes in how the pair behaves. Additionally, GBP/USD might test the 1.3400 level, according to forecasts from the UOB Group. FXStreet has introduced a new design to improve user experience. Other insights include a focus on DeFi tokens that are driving market rallies and forecasts for forex trading in 2025. FXStreet highlights that its content includes forward-looking statements that come with risks. Readers should do their own research before making any investment decisions. The platform is not responsible for any damages resulting from the use of its information. The higher-than-expected inflation rate in Turkey is a significant signal for us. The 3.23% monthly rise brings the annual inflation rate to an astonishing 75.4%, putting intense pressure on the lira. This data almost guarantees that the Central Bank of the Republic of Turkey (CBRT) will need to take strong action at its next meeting, likely with another interest rate increase from the current 50% policy rate. We expect increased volatility in the Turkish lira in the coming weeks. Buying options on USD/TRY may be a smart strategy to capitalize on potential upward breakouts beyond the 35.00 level. Options allow for defined risk while taking advantage of the significant movements we anticipate around policy announcements.

Expected Market Volatility

Looking back, we observed a similar situation in late 2023 and early 2024 when persistent inflation forced the CBRT into a series of aggressive interest rate hikes. Each time, the lira experienced significant fluctuations, benefiting those who were positioned for volatility rather than a specific market direction. History indicates that these high-inflation reports often lead to major market movements. This situation is intensified by the ongoing strength of the US dollar, with the DXY index remaining steady above 106. All attention is on the upcoming US ISM Services PMI and employment data. A strong performance would further boost the dollar against weaker currencies like the lira. Given this scenario, we should prepare for wider price movements across emerging market currency pairs, not just in Turkey. The Deutsche Bank Currency Volatility Index is already rising towards 8.5, indicating that the market is starting to anticipate more uncertainty. We should consider strategies that take advantage of this expected increase in market fluctuations. Create your live VT Markets account and start trading now.

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