The ruble will be volatile in the next two days
Russian market will open with decrease on the background of the decline in futures on global stock indices. Such reaction of the markets expected the FOMC, the fed increased the upper level of the interest rate by 25 b.p. to 2%. The Committee notes that the labour market continues to improve, economic activity is growing at a steady pace, increased household spending, investment in the core business continue to grow. Thus the fed confirmed the good condition of the U.S. economy. Also 8 members of the Committee are waiting for the rate increase in 2018 once or twice.
But while most for a single increase to 2.25%. This may be in September-November based on the futures bet, where the probability is 64-68%. Similar situation was in 2017 – summer rate did not increase. However, the rate of interbank loan LIBOR for a period of 1 month is quoted at 2.05% and a premium to the fed rate will increase until the next meeting.
Program for reducing the fed’s balance sheet also plays in favor of the dollar. It creates a reason to accelerate the outflow of foreign liquidity from emerging markets. Since the present value of the fixed income will now be calculated at the rate of 2% and above, making it an attractive investment in reliable American paper. Against this background, we expect growth of the dollar against foreign currencies until the autumn of this year.
However, against this is to play the ECB, if it decides to start tapering the stimulus. The volatility of the ruble will also increase on Thursday and Friday due to the payment of premiums and the meeting of the Central Bank of the Russian Federation. We believe that the Russian Regulator will leave interest rates unchanged citing increased external risks and the risk of inflation due to the cost of gasoline.