Sberbank CIB named four reasons for the weakening of the ruble

“The ruble has already lost a positive attitude, formed by mid-April”, — wrote in his morning review analyst at Sberbank CIB Tom Levinson.

Wednesday, June 1, the morning trading session on the Moscow stock exchange opened with a small weakening of the U.S. currency: the dollar fell by 19 kopecks to RUB against 66,51 closing on Tuesday, may 31. By 13:30 Moscow time the dollar was worth RUB 66,9

In his review of the “Global and Russian foreign exchange market. Ahead important days,” Tom Levinson calls the four essential factors that can affect the rate of the Russian currency. In particular, on Thursday, June 2, there will be a meeting of the ECB, at which will consider the current interest rates and the stimulus programme of the European economy. The analyst does not expect any changes in monetary policy of the European regulator, but believes that the positive assessment of the EU economy from the ECB President Mario Draghi could boost the Euro. “Investors should not underestimate the ability of the ECB to surprise the market. So, December 3, the ECB has provoked the most significant daytime fluctuations in the EUR/USD pair since the beginning of 2015 (an increase of 3%),” writes the analyst.

In addition, as indicated in the review, this is the last meeting before the upcoming ECB in late June, a referendum in the UK, which will discuss the country’s withdrawal from the European Union.

Also on Thursday will host a summit of member countries of OPEC will be known and recent data about oil stocks in the United States. As Levinson notes, the key question is whether exporting countries to agree on a “freezing” of oil to ensure price balance at $50 per barrel. “OPEC still can’t decide on a single policy, as Saudi Arabia seeks to consolidate its success in maintaining market share and does not support oil prices”, — says the analyst. He notes that in the February—April 2016 the growth in oil prices from $30 to $50 was associated with the soft rhetoric of the fed and market expectations that OPEC will agree to freeze production. This time such support, the oil market will be gone.

The third factor of influence — the speech of the fed Janet Yellen on Monday, June 6. It can shed light on the plans of Federal reserve to raise rates. In late may, the head of the American regulator said that it is likely the fed’s rate hike will happen in the coming months. Russian Minister of economic development Alexei Ulyukayev earlier predicted that the rate increase could occur in one of two upcoming meetings. However, in the opinion of the Minister, significant impact the fed’s decision on the ruble will not have, because, in his words, “in General, these expectations are fulfilled”. Tom Levinson believes that Yellen is unlikely to make a statement about the upcoming rate increase, but if it happens, it can cause the sale of assets in emerging markets, which will weaken the ruble.

Also on the exchange rate can influence the publication of U.S. economic data on Friday, June 3, says Levinson. Positive data on the state of the labor market can stimulate the weakening of the Euro, which potentially will lead to the weakening of the ruble. As the analyst writes, “since the beginning of 2015 EUR/USD 25 sessions have fallen, or was falling more than 1%: six times this happened as a result of decisions of the ECB and four times after the publication of employment data in the United States.”

All these factors may push the dollar up, Levinson indicates. However, in his opinion, significantly us dollar still will not grow. “In our opinion, on the market there are also factors that are able to provide good support for the rouble. In June, we see no reason for independent strengthening of the ruble (dividend and tax payments are small, whereas the amount of debt repayment significant), but unless there is a sharp drop in oil prices, we expect that the dollar will rise to 70 rubles”, — wrote the analyst.