The Ruble was on offer this afternoon after the Russian Central Bank cut its key policy rate to 6.25% from 6.5%. Even though this was in line with the expectations of most analysts, there were a few who felt that a 50bps could be delivered. However, the 25bps cut leaves open the possibility of a further reduction by 25bps in February 2020, especially as the bank says it will assess the possibility of further cuts in the first half of next year.
The key points in the policy statement are as follows:
“Disinflationary risks still exceed pro-inflationary risks over the short-term horizon.”
“Monetary policy easing that has already been undertaken may have a stronger upward effect on inflation than the Bank of Russia estimates.”
“Pro-inflationary risks posed by budget expenditure growth in 2020 hold low because the rise in expenditures is likely to be distributed over time.”
“Will consider the necessity of further key rate reduction in the first half of 2020.”
“Growth rate may be close to the upper bound of the Bank of Russia forecast of 0.8–1.3%.”
“GDP growth rate will gradually increase from 0.8–1.3% in 2019 to 2–3% in 2022.”
“Will assess the effect of the adopted key rate decisions on monetary conditions and inflation movements.”
Most of the price movements being seen earlier in the session on the USDRUB was due to a recovery in crude oil prices beyond $59. However, the USDRUB is now trading higher after initially opening the day with a downside gap.
The USDRUB is now aiming for the initial resistance target at 63.1923 (lows of March 20 and Nov 4). A break above this price level targets the price zone around 63.6883. Further north, the double top support of 64.4224 could come into play if further bullishness persists.
On the flip side, if price stalls at the immediate resistance target, a retest of the June/July double bottom at 62.5178 could be on the cards, especially if crude oil prices continue to rally well beyond the $60 mark.