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Turkish Lira (TRY) vs Euro (EUR): Market Sentiment and Outlook

Forex and Stock Market Exchange

The Turkish lira's exchange rate against the euro (EUR/TRY) has become one of the most important barometers of emerging-market stress and policy uncertainty. As Turkey's economy battles inflation, fragile reserves, and political risks, the lira's performance is under constant global scrutiny. The European Union accounts for more than 40% of Turkey's exports, making shifts in EUR/TRY a critical factor for trade, investment, commodities, and tourism. Beyond economics, the pair has geopolitical significance, reflecting Turkey's role as a bridge between East and West. In short, a weak lira often signals turmoil and inflation risks, while euro strength can indicate global safe-haven demand or resilience in Europe's economy.

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This article provides a complete EUR/TRY analysis: current market sentiment, technical signals, price history, economic fundamentals in Turkey and the Eurozone, geopolitical risks, and expert forecasts. Whether you are a trader, investor, or business exposed to currency fluctuations, understanding these dynamics is crucial for decision-making.

EUR/TRY Market Sentiment and Technical Analysis

As of mid-May 2025, EUR/TRY trades around 43-44 per euro, near all-time highs. After spending much of 2024 in the 30-38 range, the lira has lost roughly a quarter of its value against the euro in just one year. The momentum is unmistakable: EUR/TRY continues to push higher despite brief retracements.

  • Moving Averages: The 50-day SMA has crossed above the 200-day SMA, a classic golden cross that signals a strong uptrend.
  • RSI (Relative Strength Index): Weekly RSI hovers around 60-70, showing bullish momentum but edging toward overbought territory.
  • MACD: Both daily and weekly MACD indicators remain positive, confirming sustained upward momentum.
  • Short-Term Pullbacks: Hourly charts show occasional profit-taking, with 80-90% of signals briefly flashing bearish. These are considered pauses in a larger uptrend rather than trend reversals.

Trader sentiment tells a similar story. Retail traders remain heavily short EUR/TRY, betting on a lira rebound near the 30-32 level. This contrarian positioning is often a warning sign -- when nearly all small traders are on one side of the market, the opposite move tends to prevail. Institutions, on the other hand, maintain a bearish outlook on TRY, expecting further weakness.

Historical Price Perspective

To understand today's exchange rate, we must revisit recent history:

  • In 2020, EUR/TRY averaged around 7. By 2022, it had soared past 20 due to unorthodox monetary policy.
  • In 2023, under Finance Minister Mehmet Şimşek, orthodox policy briefly stabilised the lira near 30-31.
  • By late 2024, EUR/TRY climbed to the 38 range, and in early 2025 it smashed through 42-44, setting new records.

In less than five years, the lira has lost more than 500% of its value against the euro, a stark illustration of chronic inflation and policy volatility.

Turkey's Economic Fundamentals

  • Inflation: Annual inflation stands at 37.9% as of April 2025, well above the central bank's target and a key driver of lira weakness.
  • GDP Growth: Growth slowed from 3.2% in 2024 to an expected ~2.9% in 2025, signalling fragility.
  • Reserves: FX reserves have plunged below $20 billion, following heavy interventions to defend the lira.
  • Interest Rates: After rate cuts to 42.5%, the central bank reversed course in March 2025, hiking to 46%. Real rates remain barely positive, limiting lira support.
  • Reforms: Şimşek's orthodox reforms restored some investor trust, but political shocks -- like the March 2025 arrest of Istanbul's mayor -- severely dented confidence.

Eurozone Economic Fundamentals

  • Growth: Eurozone GDP grew 0.4% in Q1 2025, modest but stable.
  • Inflation: Core inflation cooled to 2.4%, close to the ECB's 2% target.
  • Monetary Policy: The ECB began easing in April 2025, cutting rates to 2.25%, with further cuts expected.
  • Risks: A looming U.S.-EU trade war could slow growth and weigh on the euro.

In short, the euro is entering a softening phase, but compared to the lira's turmoil, it remains a safer currency for investors.

Geopolitical and Policy Drivers

  • Political Uncertainty: Domestic politics, from arrests of opposition figures to policy flip-flops, continue to destabilise investor confidence in Turkey.
  • Central Bank Actions: Sudden rate hikes and FX interventions provide temporary relief but cannot mask long-term weaknesses.
  • Global Risk Appetite: Oil prices, U.S. interest rates, and emerging-market sentiment all directly affect TRY.
  • Eurozone Politics: While relatively stable, surprises in EU elections or debt disputes could also shift EUR/TRY.

Analyst Forecasts

Most analysts remain bearish on the lira:

  • Reuters Poll (Apr 2025): EUR/TRY seen at ~48 by end-2025.
  • Capital Economics: Forecasts EUR/TRY at ~44.9 by end-2025, mid-40s in 2026.
  • Trading Economics: Projects ~43.1 within 12 months.
  • AI Forecasts (CoinCodex): Suggest ~48 by end-2025, ~63 by mid-2026.

The consensus is clear: unless Turkey enforces strict policy discipline, the lira is likely to weaken further.

Scenarios and Risks

  • Bearish TRY Scenario: Inflation stays high, CB resumes cuts → EUR/TRY climbs toward 50-60.
  • Stabilisation Scenario: Strict reforms succeed, inflation falls → EUR/TRY moderates to 38-40.
  • Shock Scenario: Oil spike, political crisis, or capital flight → EUR/TRY surges beyond 60.
  • Positive Shock: Geopolitical resolution and policy credibility → TRY recovery, EUR/TRY drifts lower.

Conclusion

Key Insights: EUR/TRY remains at record highs due to Turkey's inflation crisis, political instability, and fragile policy credibility. Technical indicators highlight strong bullish momentum for the euro, while fundamentals suggest ongoing TRY weakness. Forecasts from banks, analysts, and models all point to further depreciation unless Turkey delivers a credible and lasting policy shift.

For traders: Expect volatility. Use strict risk management, as sharp retracements are possible even in a long-term uptrend. For businesses: Importers should hedge against further TRY depreciation, while exporters can benefit but must remain cautious.

Ultimately, the Turkish lira remains under severe downward pressure. Close monitoring of monetary policy decisions , inflation data, and political developments will be critical for anyone with exposure to the EUR/TRY exchange rate in 2025 and beyond.

References

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