The massive depreciation of the Russian ruble risks triggering the country in a worse crisis than the one in 1998. Since the beginning of the year we have witnessed a depreciation of 50% of the ruble of which 20% registered in the last 2 days. The latest reaction was unleashed despite the sudden increase of the interest rate to 17%. In addition, among the causes of the Rubble’s depreciation we can include the significant devaluation of the oil prices and the sanctions imposed by the United States and the European Union after the Ukraine crises.
The USDRUB pair touched yesterday the record high near the level of 80 and currently it is being traded near the 70 levels. The relative appreciation is most probably due to the Russian Central Bank intervention. It is difficult to name now the moment when we can activate a sell position, but for sure the descending path will be much harder than the ascending one. Positive variations are still possible and only extreme actions can calm down the situation now. We should also be prepared to see the consequences of this episode over the economy of Europe for a long time to come. How the Putin administration is going to handle this crisis is yet to be clear; however among the options, two of them stands out:
- Russia will call its troops back from Ukraine leading the West lift the sanctions
- Russia will escalate the Ukrainian crisis, bringing it to clear open “war” shifting the lower and middle class Russians’ attention from their economic situation to the “patriotic” activities
The second options is expected to take on stage, especially due to the fact that we have had rumors last night that Russia is moving some nuclear arsenal to the Ukraine. In either case, this crises is yet to be over.
Meanwhile, today may be one of the most important days in the United States when the FOMC meeting will be held at 09.00 pm GMT time. The markets are expecting the Fed to give details about future date of an interest rate increase given the fact that the United States reported positive data during the last period. We can name the industrial production to 1.3% increase, the University of Michigan Consumer Sentiment rising to 93.8 points, unemployment rate falling to 5.8% and the Non-Farm Employment Change reporting 321K added jobs in November. The Down Jones index may rebound today from the support line at 17000 points, thus pushing the entire range of indices, while the EURUSD may approach the 1.2400 level by the end of the day.
Concerning the GBPUSD we can take into account the continuation of the lateral movement delimited by the resistance level at 1.5800 and the support level close to 1.5585. Even if the market enjoyed a positive movement after the stress results of the 8 most important financial institutions in the country, a correction in this range should be watched.
In relation to the Australian and the New Zeeland dollar we may further expect the downward trend to continue. The Aussie was given a clear descending path by the Central Bank this week, which prefers the currency to go down in order to achieve economic growth. The New Zeeland dollar may be influenced on the long term by the decrease in dairy production as well as by the economic slowdown in China (HSBC Flash Manufacturing PMI down to 49.5 points, the CPI down to 1.4%, the PPI down to -2.7% and the Industrial Production lowered to 7.2%). In the NZDUSD evolution, we may consider the 0.7675 support level while the evolution of the AUDUSD, we may take into consideration the 0.8100 support level.
