The Russian ruble could benefit from several important macro events. The USD/RUB exchange rate has already dropped by over 14.75% from its highest point in 2023, making the Russian currency one of the best performers in the emerging market.
US inflation and the Federal Reserve
One potential catalyst for the Russian ruble is the relatively weak economic numbers from the United States.
Last week, data by the Institute of Supply Management (ISM) showed that the manufacturing and services PMIs dropped below 50 in June. A PMI figure of below 50 is a sign that an industry is contracting.
Another report revealed that the labor market was not doing well as the unemployment rate rose to 4.1% in June. Wage growth slowed even as the economy created over 202k jobs during the month.
Most importantly, the BLS downgraded its May job numbers from 334k to 216k. It has revised its jobs numbers downwards several times this year.
Most importantly, data released this week revealed that the country’s inflation continued dropping in June. The headline Consumer Price Index (CPI) contracted by minus 0.1% in June. It then from 3.3% to 3.1% on an annual basis.
The core CPI, which excludes the volatile food and energy products, dropped from 3.4% in May to 3.3% in June.
These numbers mean that the Federal Reserve will leave interest rates unchanged in its next meeting. It will then use the Jackson Hole Symposium in August to signal that a rate cut could come as soon as in its September meeting.
A Fed rate cut would be bearish for the USD/RUB pair since it will lead to a weaker greenback as we saw in 2020. Indeed, the US dollar index has dropped from over 105.5 this month to about 104.5.
A Fed rate cut will also widen the spread between US and Russian interest rates. The benchmark Russian rate stands at 16% and the central bank has signaled that it could hike again since inflation is rising. Data released this week showed that the Russian CPI rose to a 16-month high in June.
The interest rate differentials mean that traders will continue borrowing the US dollar to invest in the Russian ruble.
Oil prices are doing well
The USD/RUB pair could drop because of the ongoing performance of crude oil. Brent, the global benchmark, has remained steady this year. It was trading at $85.58, where it has been in the past few weeks.
The West Texas Intermediate (WTI) has also risen to $82.90, a move that has translated to Russian urals.
The steady oil prices will help to offset the sharp drop in Russian oil shipments. Data released this week showed that oil exports dropped to 7.6 million barrels a day in June, the biggest drop since the war in Ukraine started. Monthly revenues stood at $16.4 billion during the month.
A key energy risk for Russia is that the price of natural gas has tumbled by over 70% from its highest level in 2022. Russia is one of the biggest gas exporters in the world and has suffered as Europe has substituted its buying from the United States and othe countries.
USD/RUB technical analysis
The other positive catalyst for the Russian ruble is that the USD/RUB pair has formed a falling channel pattern. It has also formed a death cross chart pattern as the 200-day and 50-day Exponential Moving Averages (EMA) crossed each other.
The USD/RUB pair has also formed a bearish divergence pattern as the Relative Strength Index (RSI) and the MACD have retreated. If this happens, the next point to watch will be at 82.67, its lowest point in June.
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