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Hawkish Bets Buoy RUB as Bulls Eye 72.00 vs the USD

RUSSIA
  • USD/RUB opens flat to lower, despite oil markets trading in the red and an early bid in the greenback.
  • Price action failed to hold below 72.00 in yesterday's session but may continue to pressure the level as markets ramp up hawkish bets for Friday's CBR.
  • Bloomberg seems to have updated its consensus call now to +50bps from +25bp, in line with our base case – but some murmurings are going around RE risks to +75bp in keeping with the CBR's trend of delivering above consensus.
  • Having broken 72.50 support and looking to gain more downside traction the CBR may factor reduced FX passthrough to inflation into its reaction functions in future meetings.
  • However, Nabiullina has reiterated her "permanent" concerns over geopolitical/sanctions risks to RUB stability. Nevertheless, hawkish expectations should continue to support RUB into the meeting and beyond.
  • 3x6 FRA-Mosprime spreads have been fluctuating around +88-91bp in recent days, implying a terminal range in the 5.75-6.00 range in line with our base case.
  • Oil markets turned lower on a surprise EIA inventory build, dampening expectations for a strong start to the US driving season.
  • US CPI will be the big-ticket item on the agenda for today. Intraday Sup1: 72.0222, Sup2: 71.6625, Res1: 72.3409, Res2: 72.5433
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
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MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
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