Closing the previous session:
USD / RUB TOM Pair: 76.1 (+ 0.4%)
EUR / RUB TOM pair: 82.7 (+ 1.5%)
CNY / RUB TOM pair: 12.23 (-1.7%)
Trading week meets red paper investors. Sales in the US and Asia can spread to European locations. The dominant factor is inflationary pressure, which leads to a large increase in credit market interest rates. At the same time, geopolitics only worsens the price situation in economies.
The US currency is still in high demand, acting as a safe haven. And the Russian ruble has probably completed the process of rapid strengthening in the context of the lifting of certain restrictions by the economic authorities.
On the energy front, the dynamics of future contracts are multifaceted. While oil contracts are weak due to the United States’ desire to increase its supply of raw materials to the market, prices continue to soar due to the risk of supply disruptions and low stocks.
Russian ruble on Friday completed the players with the weakening of the ruble to the values of last November – 71 for the dollar and 77 for the euro. In addition, the acceleration of the fall of currency pairs occurred after an unplanned reduction of the Central Bank interest rate to 17%.
First, players initially felt that the easing of the monetary interest rate was not enough to end the Central Bank’s existing restrictions on the currency. Second, the inertial nature of the instruments was affected, when players against the trend were forced to close unprofitable positions in a hurry. Usually, after the capitulation of one of the parties in the exchange process, a reversal occurs. As a result of Friday, the ruble lost its daily gain and formed a fairly stable formation on the chart against the weakening of the hryvnia.
Later, more news from the regulator began to arrive – the 12% brokerage fee for transactions in dollars, euros and pounds was canceled. And in a week there will be some chance of getting cash currency.
Lifting the barriers is the key to stopping the strongest strengthening of the hryvnia. Earlier, the ruble recovered more than 40% of its losses from the dollar and the euro from its lows, while the yuan collapsed by 50%.
There are now entries for resetting currency pairs. Given the extremely volatile nature of monetary instruments, one cannot rule out a rather emotional start and subsequent upward growth of the dollar and the euro.
The nearest technical benchmarks for the recovery of the pairs are considered 80 for USD / RUB and 88 for Euro. But that may not be the limit – there are bars for 90 per dollar and below 100 for the euro. The highest is unlikely. And the euro may even lose momentum against the dollar, as the US hryvnia pushes the European currency into the global foreign exchange market.
In the medium term, devaluation expectations will be dashed as part of the ongoing downturn under the budget rule and the maintenance of quotas for 80% of exporters’ sales revenue.
US dollar index (DXY: 99.9 p.) Set a target of 100 p. Factors for the dollar – an accelerating cycle of normalization of the monetary policy of the US Federal Reserve and activation of the protective function of the dollar in the context of the withdrawal of investors from risky securities.
So in less than a month, the Fed will continue to raise interest rates and its balance sheet, which swelled during the pandemic to a staggering $ 9 trillion, will begin to fall at a rate of $ 95 billion a month. This is a very important factor in reducing the appetite for risky securities by raising interest rates in the credit market.
The Central Bank of the Russian Federation is easing monetary policy and the Fed is accelerating the tightening of the screws, so the DXY factor may become an additional negative for the ruble exchange rate.
Oil falls by 2%, and Brent is trying to stay above $ 100. There is a possibility that market participants will continue to trade at double-digit levels.
The United States and the International Energy Agency are seeking to liberalize their market reserves in order to reduce inflationary pressures on raw materials and, at the same time, reduce Russia’s export potential.
Also against the oil bulls is the growth factor of the American drilling activity and the weekly increase of the crude oil reserves. Finally, pandemic barriers remain in China, the world’s largest importer.
At the same time, the fall in futures for Brent will only have an aggravating effect on exporters’ currencies, as the main factors in the very high exchange rates are both the natural volumes of commissions and the constraints in the domestic currency.
Russian government bond index (RGBI: 119.01 units) confirmed our previous estimates. The calculations resulted in insufficient consideration of the OFZ rate of the forthcoming easing of the Central Bank. As soon as the regulator lowered the interest rate, the price index for long-term bonds jumped over 3%.
The reference point for recovery was 120 p bar. First of all, RGBI is on target. At the same time, expectations are limited to further monetary easing and a real reversal of the Central Bank’s monetary policy cycle. This means that bond yields may be even lower and bond prices higher than current ones.
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