RUB could lose momentum in the near-term – Danske Bank

Senior Economist at Danske Bank Vladimir Miklashevsky sees RUB losing some momentum in the near term, mainly on USD dynamics.

Key Quotes

“On 28 October, Russia’s central bank (the CBR) kept its key rate at 10.0%, in line with consensus and our expectation. While the general tone of the CBR’s statement was broadly expected, the central bank added a pinch of hawkishness while seeing 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, leading us to expect the next cut in Q2 17. Market pricing has also moved towards a cut in Q2 17, from early Q1 17 previously”.

“Russia’s currency has been the second-best performer among 24 emerging market currencies YTD. Yet, if the stronger USD story goes on into 2017 on Trump’s fiscal expansion promises and the Fed’s moderate tightening, we are becoming less RUB hawkish, expecting some weakness before the Fed’s meeting this December”.