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BONDS

Core Fixed Income Meandering On Thursday

CNH

Yuan Shuts Its Eyes To PBOC Fix

US TSY FUTURES

TUZ1 Given

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  • USD/RUB trades -0.12% lower this morning, in line with early selling pressure on the BBDXY and firmer oil markets (+1.10%).
  • The cross closed Friday's session -0.10% lower and -0.21% for the week, maintaining a range from 72.50-73.63 with sellers emerging around the 100 & 50dmas above.
  • Oil markets continue to bolster RUB demands, despite sanctions risks with Brent now approaching the $80 handle.
  • Focus will be on inventory data to gauge the depth of the supply crunch after storms cut production in the Gulf.
  • On the sanctions front, the Kremlin has been relatively subdued and is clearly awaiting more progress before delivering threats. The geopolitical risk premium has risen slightly, but is not flashing red as of yet.
  • Although Russia has decidedly robust sanctions buffers (high FX reserves, relatively low foreign holdings of OFZs and low exposure to USD debt), the geopolitical risk premium has scope to grow from currently low levels and will be monitored closely this week.
  • Moreover, we have a busy week ahead on the data front, with GDP, current account, unemployment, real wages, PMI and retail sales number to parse towards the end of the week.
  • USD/RUB momentum remains to the downside, but will need to overcome 72.50 support to take the next leg lower.
  • RUB still remains among the most favoured EM currencies going into year-end. Intraday Sup1: 72.5556, Sup2: 72.3891, Res1: 72.8620, Res2: 73.00