What’s going on with the Russian ruble (USD/RUB)?

The USD/RUB exchange rate has moved sideways in the past few days as investors focus on the next Federal Reserve actions and the energy sector. The pair has remained at 88, down from last year’s high of 102.53.

US GDP and crude oil prices

The USD to Russian ruble pair reacted mildly to the latest US GDP data. According to the statistics agency, the American economy did quite well in the fourth quarter as it crashed economists' estimates. The report showed that the economy expanded by 3.3% in Q4, higher than the expected 2.0%.

The report has an important implication for the US dollar and the world market. For one, it means that the economy is in such a good shape such that the Federal Reserve has no incentive to start cutting interest rates any time soon.

Recent data confirmed that the economy is still doing well. The unemployment rate has remained at 3.7% while wage growth stands at 4%. This means that wages, at least officially, are growing at a faster pace than inflation, which is ideal.

Additional data by S&P Global revealed that the manufacturing and services PMIs remained above 50 in January. The manufacturing figure has been below 50 in the past few months, meaning that it has made progress in January.

Therefore, with inflation sitting above 2%, there is a likelihood that the Federal Reserve will delay its interest rate cut. Most analysts see it starting to cut rates in June, which is a positive thing for the USD.

The USD/RUB pair has also reacted to the performance in the energy sector as the Red Sea crisis escalates. The most recent data shows that the price of Brent and West Texas Intermediate (WTI) has not surged but has remained stable.

This is notable because Russia makes most of its money selling oil. It has continued doing that even after Western countries imposed a price cap by selling vast oil resources to China, India, and other Asian countries. 

The challenge for Russia is that the prices of other commodities it sells have plunged. Natural gas price has crashed by over 80% from its highest point in 2022 while wheat, corn, and other metals have plunged.

USD/RUB technical analysis

USD/RUB chart by TradingView

The USD/RUB exchange rate peaked at 102.53 in 2023 as the ruble sell-off plunged. It then started retreating and formed a double-bottom pattern at 86.98. It has failed to move below this level several times since November last year despite the actions of the Fed and the Russian central bank. 

The pair remains below the 50-day and 25-day Arnaud Legoux Moving Averages (ALMA). Therefore, the outlook for the pair is currently neutral with a bearish bias. More ruble strength will be confirmed if it crashes below the support at 86.98.