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Geopolitics, Oil Weakness Hurt RUB Ahead of Today's CBR

RUSSIA
  • USD/RUB opens lower in line with a softer greenback and modest losses in oil markets, having suffered a sustained melt higher yesterday.
  • Geopolitical concerns and weaker oil markets scuppered a breakout below 72.6566 this week and may keep the cross trading choppily in the coming weeks as more US, UK & EU sanctions filter through.
  • Today's focus is on the CBR, however, expected to hold one last time before initiating a hiking cycle to quell a bout of acute CPI overshooting. Continued upside in PPI and w/w CPI places the balance of risks to the upside for a surprise 25bp hike in today's meeting – but our base case remains for a hold.
  • 6m Mosprime vs 6x9 FRA spreads indicating ~124bp of hikes in the pipeline, which seems overkill given substantial 2H21 disinflationary factors.
  • We see 50-75bp as more expedient (4.75-5.00 2021 terminal rate), with potential to reach the middle of the neutral rate zone (5.5%) by end 2022.
  • RUB will likely gain some support from hawkish guidance from Nabiullina towards an expedited hiking cycle – tone and phrasing to be watched closely.
  • Intraday sup1: 74.0616, Sup2: 73.5599, Res1: 74.4040, Res2: 74.5050
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com

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