USD/RUB: Ruble waits for Russian inflation data, CBR decision

The USD/RUB exchange rate has moved sideways in the past few days as investors refocus on key actions from the United States, falling crude oil prices, and the upcoming Russian inflation data and central bank decision. It was trading at 90.18, a few points higher than last week’s low of 86.65.

Crude oil prices have tumbled

A key catalyst for the Russian ruble has been the performance of crude oil and natural gas prices. Brent, the global benchmark, has dropped to $71.73, its lowest level in over a year. Similarly, the West Texas Intermediate (WTI) has moved to $67. 

There is a likelihood that these benchmarks will continue falling now that they formed a death cross pattern in July. A death cross happens when the 200-day and 50-day Exponential Moving Averages (EMA) crossed each other. 

Natural gas price has also been under pressure. According to TradingView, it was trading at $2.35, down by over 35% from its highest point this year.

These commodities are important for the Russian economy because they generate over 80% of the total foreign income. Russia made over $180 billion in crude oil revenue in 2023, and the government expects that this year’s receipts will be over $239 billion. 

Therefore, the falling crude oil and natural gas prices is not a good thing for the Russian ruble, especially as the war in Ukraine continues. Most of its oil revenue is now going to pay the military and make equipment. 

Oil prices continued to fall on Monday even after the OPEC+ cartel decided to restrain production for longer. The group, led by Saudi Arabia and Russia, opted to restore output later this year because of the ongoing weakness in China.

Russian inflation and CBR decision

The next important USD/RUB news will be the upcoming Russian inflation data and the Central Bank of Russia (CBR) interest rate decision.

Russia is one of those countries that is having a big inflation problem. The most recent data showed that the headline Consumer Price Index (CPI) has been in a constant increase in the past few months.

The CPI bottomed at 2.3% in April 2023 and has been in a strong uptrend since then, reaching a high of 9.1% in July. 

Analysts expect the upcoming data to show that Russia’s inflation eased from 9.1% to 9.0%, the first time that inflation eased in over 16 months. 

Russia is one of the few countries where inflation has been rising in the past few months. In Europe, the headline CPI has dropped to 2.3% while in the UK, the figure has dropped to the Bank’s of England’s target of 2.0%.

The next important catalyst for the USD to RUB exchange rate will be the upcoming CBR interest rate decision. 

Unlike other central banks, the CBR has been one of the most hawkish banks in the past few months. It hiked interest rates by 200 basis points to 18% as it sought to counter inflation. Analysts expect the bank to deliver another interest rate hike to 19%.

Federal Reserve actions ahead

The USD to RUB exchange rate has also reacted to the activity in the United States. Recent economic numbers have shown that the economy is slowing. 

A report by the Bureau of Labor Statistics (BLS) showed that the economy created 818,000 fewer jobs than reported in 12 months to March this year. 

On Friday, the agency revised its July jobs numbers downwards from 114,000 to 89,000, meaning that the labor market was worse than expected. The unemployment rate remains above 4%.

The next important USD news will be the upcoming US Consumer Price Index (CPI) data scheduled for Wednesday. These numbers will likely solidify the view that the Fed will slash interest rates in September.

Economists believe that the headline CPI moved from 2.9% in July to 2.6% in August, the lowest point in over 2 years. That report will confirm that the Fed will either cut rates by either 0.25% or 0.50% later this month.

USD/RUB technical analysis

The Russian ruble has strengthened substantially against the US dollar this year as the USD/RUB dropped from 102.45 in August last year to 90.27, or a 12% drop today.

It has remained below the descending trendline that connects the highest swings since October last year. 

The pair has recently bounced back from a low of 87 last week to 90, moving above the 50-day and 200-day Exponential Moving Averages (EMA). 

Therefore, the USD/RUB exchange rate will likely continue rising as bulls target the descending trendline at around 92. In the longer term, however, the Russian ruble will continue strengthening because of the higher interest rates from the country. 

Interest rates are set to rise to 19%, and with inflation stuck at 9%, investors in Russian bonds are making a 10%, return, which is highly attractive.