RUB keeps the bullish stance – Danske Bank

Senior Economist at Danske Bank Vladimir Miklashevsky assessed the recent CBR rate decision and the outlook on the Russian Ruble.

Key Quotes

“On Friday 28 October, Russia’s central bank kept its key rate unchanged at 10.0%, in line with the unanimous consensus. While the general tone of the CBR’s statement was broadly expected, the central bank added a pinch of hawkishness to its potential downgrades due in Q1-Q2 17, which it had already declared in September. The hawkishness derives from enhancing unsteady disinflation and a slowing deceleration of inflation expectations, which lead us to expect the next cut in Q2 17. The market pricing has also moved towards a cut in Q2 17, from early Q1 17 previously”.

“The RUB got some support from the decision, as the statement’s hawkishness erased hopes of a rate cut early in Q1 17. Yet, the USD/RUB could not hold long under the resistance level of 62.86 as the falling oil price added to the currency’s swings. We remain slightly bullish on the RUB, as carry traders like the currency in order to benefit from the large interest rate differential. We have kept our USD/RUB forecasts at 62.00 (3M), 59.50 (6M) and 57.10 (12M) seeing the Fed’s possible rate hike in December 2016 as the major upside risk for our USD/RUB projection”.