As expected, the Central Bank of Russia (CBR) left interest rates unchanged on Friday, suggesting the easing cycle is over. According to analysts from Rabobank, the hawkish message from the CBR is a bearish signal for both USD/RUB and EUR/RUB.
Key Quotes:
“The hawkish message from the CBR is a bearish signal for both USD/RUB and EUR/RUB given that the Fed and the ECB have no intentions to even contemplate monetary policy normalisation. Essentially, the interest rate differentials should widen in favour of the ruble over the course of 2021 which in turn should apply a downside pressure on USD/RUB and EUR/RUB.
“However, the scope for a retracement in the coming weeks is likely to remain limited in view of the risk of Western sanctions. To some extent this risk should be already priced in and if punitive measures against Russia proved to be relatively soft and will not undermine economic recovery, USD/RUB and EUR/RUB should eventually break below 72.78 and 88.80/88.00 respectively. We see USD/RUB at 62 and EUR/RUB at 76.2 by the end of 2021.”
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