USD/RUB continues to grind after Russian Central Bank rate decision

Written by: Crispus Nyaga
December 18, 2020
  • The USD/RUB price rose slightly today after the Russian Central Bank delivered its final decision today.
  • The bank left interest rates unchanged and pledged to continue supporting the economy.
  • The main lending rate is at 4.25%, where it has been in the past four months.

The USD/RUB price rose today as forex investors reacted to the final Bank of Russia interest rate decision. The pair is trading at 73.83, which is slightly higher than this month’s low of 72.60. 

USD/RUB rises after CBR decision

Bank of Russia leaves rate unchanged

The Russian Central Bank followed the footsteps of other global banks by leaving the headline interest rate unchanged at 4.25%. That was the fourth consecutive month for the bank to leave rates at the current level. 

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The interest rate decision was in line with what most analysts were expecting. It was also in line with what Governor Elvira Nabiullina had guided in an interview last week

In a statement, she said that she expects annual inflation to remain between 4.6% and 4.9% at the end of this year. She cited one-off proinflationary factors as key contributors to the relatively higher inflation. She, therefore, expects that annual inflation will average between 3.5% and 4.0% in the coming year and then stabilise at about 4% in 2022. In a statement, she said:

“Uncertainty remains as to rather long-term structural effects of the coronavirus pandemic for the Russian and global economies, specifically, the scale of a decrease in the potential of the national economy.”

The rate decision came at an important period. For one, the Russian ruble has become relatively strong against the dollar. Indeed, it has risen by more than 10% from its YTD high of 82.81. This increase is mostly because of the overall weaker dollar as the risk-off sentiment sweeps the market. 

Fundamentally, higher crude oil prices have also helped to support the ruble. In the past few months, the price of oil has risen from negative levels to $50, which is a positive factor for the Russian economy.

Further, the decision comes as traders start pricing-in more sanctions by the incoming Joe Biden administration.

USD/RUB technical outlook

USD/RUB technical chart

On the daily chart, we see that the USD/RUB price bottomed at 72.6985 this month. This price is slightly below the 38.2% Fibonacci retracement level. It also remains slightly below the 25-day and 50-day exponential moving averages. Notably, the pair seems to be forming a bearish flag pattern. 

Therefore, in the near term, I predict that the price will ultimately break-out lower and test the 50% retracement at 71.7662.