RUB: We continue to be moderately bullish -  Danske

Analysts from Danske Bank continue to be moderately bullish on the Russian ruble in the long-term. They see as main risk to the forecast, the Fed anticipating a rate hike.

Key Quotes:

“On 16 September, Russia’s central bank (CBR) cut its key rate by 50bp to 10.0%, in line with consensus and our expectation. Yet, contrary to market pricing and economists’ expectations, the CBR’s statement and governor Elvira Nabiullina’s press conference notably emphasised that ‘the current key rate needs to be maintained till end-2016 with a possibility to cut it in Q1-Q2 17’, which we see as the cornerstone of the CBR’s message on Russia’s short-and medium-term monetary policy. Thus, we expect the next window for a cut to open by the end Q1 17.”

“Inflation fell from 9.8% y/y in January to 6.6% y/y as of 12 September. Given a stabilisation in crude prices and balanced RUB exchange rate, our model signals that CPI will decline by under 6.0% y/y in December 2016.”

“We continue to be moderately bullish on the RUB in the long term, rolling the forecasts as the Fed’s dovishness and resilient Chinese data are supportive for emerging markets globally. We see the RUB being in a win-win situation. If Donald Trump wins, many investors will take RUB positions. If Hillary leads, investors’ position is likely to be on emerging markets in general and the RUB follows the lead.”

“Downside risks for the RUB include the Fed anticipating a rate hike in December 2016. 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.”