RUB: moderately bullish in the short and long term - Danske Bank

Analysts from Danske Bank continue to be moderately bullish on the Russian ruble (RUB) in the short, mid and long term.

Key Quotes: 

“We expect Russia’s economy to expand 1.4% y/y in 2018 on Brent crude staying over USD60/bl, further monetary easing and recovering private consumption.”

“On 16 December, Russia’s central bank (CBR) kept its key rate at 10.0%, in line with consensus and our expectation. We consider the CBR’s stance is traditionally moderately hawkish.”

“Inflation fell from 6.1% y/y in October to 5.6% y/y as of 12 December 2016. Given a stabilisation in crude prices and balanced RUB exchange rate, our model signals that the CBR will reach its 4% y/y inflation target by the end-2017, which would allow a gradual cut in the key rate to 7.00% by December 2017.”

“We continue to be moderately bullish on the RUB in the short, mid- and long term, as it has been supported significantly by the pledge of the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC economies to cut oil production, while the Fed’s hawkish stance is restraining the RUB’s excessive rally.”

“Downside risks for the RUB include the Fed hiking more than three times in 2017 as the recent dots suggest. We do not expect the revoking of sanctions. An escalation of geopolitical issues and a tumbling oil price are downside risks to our GDP growth Forecasts”.