The Pound (GBP) to Turkish Lira (TRY) exchange rate rallied on Wednesday after the UK currency found support from unemployment data and on concerns that the conflict in Syria could spill over into Turkey weighed on the Lira.
Economic data released earlier in the session showed that the number of people out of work in Turkey increased by 0.7% in July compared to the previous month.
According to the Turkish Statistical Institute, Turkstat, the number of unemployed increased to 2.867 million in July, showing an increase of 213,000 in the number of people out of work aged 15 and over.
On an unadjusted basis, the unemployment rate came in at 9.8%, more than the 9.3% consensus estimate. Among the youth, aged between 15 and 24, the jobless rate was 18.2%.
The Turkish economy has come under pressure from the weakening Eurozone and the troubles along its border in Iraq and Syria. Because of those factors Turkey,’s Gross Domestic Product (GDP) was negatively impacted and slowed to a pace of 2.1% from 4.7% in the first quarter.
Also weighing upon sentiment towards the Turkish Lira are concerns that the conflict against the Islamic State along the nations border could unravel a delicate peace process between Turkey and the Kurds, who are furious that the Turkish government is refusing to assist the besieged town of Kobane.
Heavy fighting between Kurds and Jihadists has created an outcry against Turkey which has forces sitting idly by whilst Kobane burns.
The plight of the town caused riots amongst Turkey’s 15 million Kurds last week, which resulted in the deaths of 35 people. Not helping matters was news that Turkish fighter planes launched airstrikes against Kurdish militants. Anger is growing in the West and questions are being asked as to whose side is Turkey on.
Sterling was supported by data released by the Office for National Statistics which showed that the UK rate of unemployment declined to 6.0% in the three months to August, compared to expectations for a reading of 6.1% and down from 6.2% in the three months to July.
Average weekly earnings in the June-to-August period, excluding bonuses, rose by 0.9% from a year earlier. Including bonuses, earnings rose by 0.7%. The improvement in wages once again raised expectations for the Bank of England to raise interest rates.
The Lira is forecast to remain under pressure as economic data out of Europe continues to disappoint and the uncertainty at Turkey’s borders is likely to increase as the war against the self proclaimed Islamic State continues.
