Major intervention in the Russian ruble as oil continues to slide

• UK bank stress tests passed by all but Co-op
  

• Mixed US data ahead of Fed meeting tomorrow
  

• European PMIs and German ZEW will be closely watched

• JPY strength as Abe’s policies get backing

The big news yesterday and overnight was the 9% fall in the Russia ruble and the 6.5% rate hike from the central bank aimed at stemming the flow. The big figures fell like dominos as USDRUB climbed to 64.23, at which point the exchange in Russia stopped making prices as we were limit high — it’s a worrying day when almost 10% of the value of the world’s largest country is wiped out. The central bank had to act and it lifted rates aggressively from 10.5% to 17% to stem the flow. On the open, the market reacted with a move lower to 58.25, only to see the selling resume with the market currently sitting at 63.60. This is a currency in crisis, and with oil continuing to look weak and geopolitical risk not going away, it feels like there is further to run.

On more familiar ground, sterling had a topsy-turvy day driven by the vagaries of US dollar trading and thinner seasonal markets. The news out this morning is that all banks except for the Co-Operative have passed the rigorous Bank of England stress tests, though only just in the case of RBS and Lloyds. This has done little for sterling this morning as we await the inflation numbers, which are expected to come in with an annual rate of 1.2% against 1.3% last time out, with fuel prices likely to have continued to provide downward pressure. We also have Bank of England Governor Carney’s speech and the financial stability report to look forward to this morning, though my feeling is we are unlikely to get any real drama.

The main figures out yesterday were stateside with the Empire manufacturing index far worse than expected, with both new orders and expectations both diving and inventories suggesting that this won’t pick up next month. In better news, industrial production proved better than expected at 1.3% against expectations of 0.7% - the largest rise since 2010 - with stronger production and tighter capacity suggesting that there is inflation building. At any point in the past where capacity has been this tight, interest rates have been much higher.

There is a slew of further US data ahead of the Fed decision tomorrow, with Building Permits and Housing Starts both expected to paint a positive picture, though the Markit manufacturing PMI has had a generally weakening trend over the last four months.

There was very little going on in Europe except for the unlikely resilience of the currency we have become accustomed to over the last month. Today, we have manufacturing and services PMIs and the German ZEW index that had a surprisingly strong reading last time out.

Elsewhere, we have seen USDJPY strengthen significantly on the back of Abe’s re-election which has been taken as vindication of his economic policy. Further positive news came out of the Tankan survey with inflation expectations eventually starting to move the needle higher in the next year and more. Australian dollar continued to be talked down by the central bank, while oil and the Canadian dollar also continued their slide. China’s HSBC manufacturing PMI dropped to the lowest in seven months at 49.5, highlighting the rising disinflationary pressures, though there was a silver lining with a huge jump in foreign direct investment in Novemeber, up 22%.

Have a great day.