Why in August the dollar will rise sharply
The Bank of Russia kept its key rate. The cost of officials has increased dramatically. The Euro may be weaker than the dollar.
The highlight of the day for the Russian financial market is, of course, the meeting of the Bank of Russia. Expected, the Central Bank decided to keep the rate at 7.25%. Taking into account the risks of acceleration of inflation, the withdrawal of foreign capital from the Russian debt and actions of the U.S. Federal reserve’s justification for the decision.
Imagine the decision to ease monetary policy is now not possible, like, on the contrary the Central Bank did not raise rates to support the ruble and the demand for Russian government securities. However, such an outcome was quite unlikely.
The government decided to sharply increase funding of government officials and security forces. For the first 5 months of this year financing of the state apparatus was increased by 16%, expenditure on the army rose by more than 5%. Additional funding was received by all law enforcement agencies. What is most interesting is that the growth of expenditure on officials and national security is on the background of consideration of the bill to increase the retirement age and rumors about the future of the VAT increase. In this case, note that the expenditure on social services decreased in January-may.
On this background the dollar exchange rate on the Moscow stock exchange today is at 62 rubles 75 kopecks, the Euro traded at the level of 72 rubles 80 kopecks. The MICEX index sank to 2250 points, quotes of Brent crude oil holding just above $ 75 per barrel. Bitcoins according to the website CoinMarketCap is around 6600 dollars.
This week a lot of attention from investors was focused on the decisions of the Central banks in the world. So the fed took the decision to increase interest rates before the European Central Bank kept interest rates unchanged values around the zero level. While investors were disappointed statements by Mario Draghi on what to expect the imminent rate increase is not necessary. Against this background, the Euro on the international Forex market has collapsed against the dollar to almost minimum values over the last 8 months. It is likely that the downtrend on the currency pair Euro/dollar on Forex will continue. It will be connected some more weak dynamics of the Euro against the ruble compared to the dollar.
Recall, we previously talked about the fact that the domestic currency is waiting for a difficult summer. It is likely that the first half of the summer will pass without any significant fluctuations on the Russian currency market, but closer to August, we may see a fairly significant growth of the dollar, and the fall is not ruling out making new highs in the USD/ruble.
The head of the analytical Department of the company,