Further RUB weakness justified

Russia's Q2 GDP data released yesterday, indicated that the Russian economy contracted by 4.7%, slightly higher than the initial print of 4.6%. Declines were seen across the board, with only the agricultural sector recording any increase, albeit that this is possibly explained by substitution effects as a result of Western sanctions. 

The market was nonplussed by the release of the data which indicates that it is a non-issue from a trading perspective. The main focus for RUB traders at present is whether CBR will lower rates at this Friday's meeting. 

"Judging by the severe losses seen in other high beta EM currencies it is rather doubtful that CBR will risk further RUB weakness, just when month on month inflation shows some signs of stabilization. RUB weakness is fundamentally justified and consequently it is preferrable a buy on dips strategy for USD-RUB", says Commerzbank.