29 December 2020
At the beginning of last week, the ruble fell sharply amid falling oil prices due to news of the discovery of a new strain of coronavirus in the UK, as well as rumors of tougher sanctions in the coming year, but won back its positions towards the end of the five-day trade.
The most important news of the past week, which positively affected investor risk appetite, was the completion of negotiations between the UK and the EU on a post-Brexit trade deal. According to Ursula von der Leyen, this agreement will prevent the interruption of key ties, ensure fair access to the common market and balanced conditions for fishing.
At the same time, the euphoria effect may be short-lived, since despite the continued British access to the EU single market, as well as zero tariffs and quotas, the deal does not cover the country’s financial sector, which has dominated the European economy for many decades. Brussels’ decision to grant Britain access to the bloc’s financial market remains unknown.
In addition, the growing number of cases of infection with the new strain has quite strongly affected risk appetites among investors, and many countries have closed their borders with the UK. It is not yet clear if previously approved vaccines can fight the new coronavirus. However, against the background of the previous news about the completion of negotiations, at the end of the year, investors are still more optimistic.
On Sunday, US President Donald Trump signed a $ 892 billion stimulus package along with a $ 1.4 trillion fiscal year 2021 budget after earlier announcing that the $ 600 per person payout was too small and proposed increasing it to $ 2,000. However, Trump nonetheless announced that he expects Congress to vote on a separate bill to increase payments to Americans. Against this backdrop, the ruble strengthened thanks to the resolution of yet another political uncertainty and an increase in risk appetite among investors.
As for other factors influencing the Russian currency, the ruble has traditionally moved along the same amplitude as oil prices, which, in turn, grew slightly, thanks to a decrease in crude oil, distillate and gasoline stocks in the United States. Also, oil prices were affected by the general recovery on the eve of Catholic Christmas amid the completion of negotiations between the UK and the EU.
By the end of the year, the ruble exchange rate has traditionally become more volatile, but rarely changes in relation to the “pre-holiday” levels by the end of the January holidays. The ruble can fluctuate greatly, but it often “returns to its place” to the values of the end of December with the return of players after the New Year holidays.
In addition, it is worth considering the tax payments made at the end of the IV quarter, which contributes to the strengthening of the Russian currency. However, at the same time, payments on external corporate debt are also taking place, which can partially offset the positive effect of the tax period. Nevertheless, due to debt refinancing, the effect of tax payments may be higher than the effect of debt payments, which, as a result, may lead to a strengthening of the ruble.
In general, we expect a more positive end of the year, although profit-taking ahead of the long holidays may “pull” the ruble down. Thus, in the absence of new “black swans” associated with coronavirus or US policy, the ruble exchange rate against the dollar may fluctuate in the corridor 73.25-75.50, and 89.50-91.00 – against the euro …
USD / RUB
After falling last week, the USD / RUB rate has strengthened and is trading at the level of 73.77 rubles. for the dollar. Stochastic lines are directed upwards, but are preparing for a reversal, indicating the limited upside potential for the instrument.
EUR / RUB
EUR / RUB quotes are consolidated at the support line of 90 rubles. for the euro. At the same time, stochastic lines are located near the overbought zone in a favorable position for selling, which may speak in favor of the continuation of the downward movement for the instrument in the short term.
This information is not investment advice.