Pound to Lira: Eyeing Fresh All-time Highs at 42.00

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The Pound to Lira exchange rate starts the new week with a 0.40% gain that takes it to 41.75, and we think further gains are possible.

The Pound is in a firm uptrend against its Turkish counterpart, and if it closes the day at current levels, we would be looking at a record daily close for GBP/TRY.

The pair's all-time high is at 41.98, reached on June 18, but the daily close was actually at 41.33, which is below current levels.

Above: GBP/TRY at daily intervals. Track TRY with your own alerts, find out more here.

We suspect there is notable resistance between here and the 41.98 high, which could frustrate attempts to hit the magic 42 level.

That said, we see little reason to bet against further gains in GBP/TRY at this stage.

However, analysts at HSBC say they are maintaining a constructive stance on the Lira in the short term, which if correct, can frustrate GBP/TRY upside.

"As disinflation sets in, real rates will turn even more TRY supportive. Therefore, we maintain our longstanding constructive view on the currency," says a monthly currency note from HSBC. "Monetary policy has stayed tight, deposit rates for TRY accounts remain high and inflation has probably peaked in May".

Note, too, that seasonality is an important consideration for the Lira, which can tend to find solid demand during the summer months amidst strong tourist demand (tourism is considered an export on a balance of payments account).

We wonder, therefore, if near-term the Lira can frustrate Sterling's appreciation potential.

HSBC analysts think further Lira appreciation can happen towards year-end: "We believe that some nominal depreciation is likely in the coming months and forecast USD-TRY rising to 36.0 by year-end."

Analysts think any Lira weakness "would likely be gradual".