The ruble went into a steep dive
The pressure on the Russian currency intensified last Friday. This time outside help was not observed: neither the tax period, no rising oil, no recovery of demand for risks – not all that successfully restrained the fall in the past. In the end, Friday the USDRUB has gained 48 cents, up to 66.20. EURRUB increased by 47 cents, to 75.44.
It seems that investors accumulate a negative attitude to the Russian currency. These sentiments are well-founded, in our view, factors such as the preservation of the trend for a rate hike in the US, the weakening of Brent and wariness about the prospects of China.
A new report on the labor market adopted a very high rate of employment growth (+250 thousand in October), with historically low unemployment (we saw lows that were not seen since 1969). Overall, published data on the U.S. labor market returned to the markets fears that the fed will aggressively raise rates in the coming months in order to prevent overheating and to keep inflation under control.
Oil managed to avoid a sharp decline. At the end of the week a barrel of Brent crude lost 0.3%, settling at $74.50. However, if you look at the whole picture, we can see: fall from peak levels of October is an impressive 16.5%.
Explain that the quotations of “black gold” last week, crushed the fears of recurrence of a new episode of excess oil. Russia, USA, Saudi Arabia, the world’s three largest producers – has significantly increased its production, with the first two countries was marked by a renewal of its own records. If Russia is dominated by expectations that production is close to peaking, then growth in the United States hold back until a temporary logistical difficulties, and high drilling activity involves the persistence of the potential to further increase speed.
The Chinese economy also leaves room for fears of investors. Published in the Monday morning data recorded a fall in composite PMI to two-year lows at the level of 50.5. This indicator reflects that of the services sector, and the production of desperately trying to cling to the growth.
Chinese courts are losing more than 1%, and the yuan has returned to decline after two-day rally, waiting for progress in trade negotiations.
This combination of factors is able to keep the ruble under pressure at the start of trading on Monday. The level above the 66 per dollar, as we remember, served as resistance in the previous three weeks. It is possible that following a period of stability of the ruble to dollar and growth to Euro, came the phase of weakening, which could gain momentum in the coming days and even weeks.