USD/RUB likely to stabilize near 55.00-56.00 range through H1 2018, says Commerzbank

The USD/RUB currency pair is expected to stabilize near the 55.00-56.00 range through the first half of this year, according to a recent research report from Commerzbank. The Central Bank of Russia (CBR) has cut its base rate by 25 basis points to 7.5 percent on Friday, as was had anticipated.

Since the CBR has been cutting rates progressively since last year, even surprising with a 50 bps cut in December, market participants might imagine that this refers to a slower pace of rate cuts or no further cuts going forward. However, something could have got lost in translation: CBR actually said that it will turn neutral from hawkish, not neutral from dovish, meaning more rate cuts are coming.

"Indeed, key policymakers have said that there is now less room for 50 bps rate cuts. We already forecast four more 25 bps cuts this year which would bring the key rate to 6.5 percent by the end of 2018. We do not see much chance of inflation accelerating to the 4 percent target from current 2 percent even by 2019," the report added.

Meanwhile, the central bank has noted the recent improvement in manufacturing, which together with higher oil prices makes it more constructive on the growth outlook. This would not amount to major change for the Russian Rouble, according to Commerzbank’s views.

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