RUB: Not really dovish – Commerzbank

FXStreet Insights Team FXStreet

Russia’s central bank (CBR) left its key rate unchanged on Friday as had been unanimously expected. There was supposed to be a more pronounced shift of language towards dovish – and indeed, some commentators interpreted the language as dovish because a key sentence on the possibility of a rate hike in coming meetings was dropped, Commerzbank's FX analyst Tatha Ghose notes.

Rouble strength seen as temporary amid peace hopes

"But, we do not view the updated language as more dovish at all: the updated projection of the key rate still retains a scenario where a rate hike occurs before the end of the year. In fact, no macroeconomic variable was revised significantly in the dovish direction. The forecast revision for the key rate does not qualify – for this variable, the forecast range was narrowed down symmetrically from both ends, which automatically means that the upper end was reduced slightly, but this does not count as a more dovish forecast. GDP and CPI projections were left unchanged."

"At the same time, we do not interpret these signals to be hawkish either. Rather we stick with our impression from before the rate decision – that governor Elvira Nabiullina may still be concerned that inflation would re-accelerate if she were to signal looser policy in coming quarters. The CBR board remembers that they paused rate hikes last year and that turned out to be premature, which sparked an inflationary upswing, later forcing rate hikes to re-start. This may be the only reason CBR is not ready to put up a dovish face yet."

"Our base-case is that CBR would keep the key rate unchanged at 21.0% for another quarter at least. Subsequently, rate cuts could begin. This shift in monetary policy will not impact the USD/RUB or EUR/RUB exchange rates much. The rouble is strong at the moment because of optimism that the war may come to an end and that some sanctions could be lifted as part of a peace deal. But, we are not very optimistic and forecast USD-RUB and EUR-RUB to drift gradually up over the coming year."

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD corrects lower, returns to 1.1650

EUR/USD could not sustain an earlier move to fresh tops just above 1.1680 on Thursday, coming under fresh selling pressure and revisiting the mid-1.1600s in the latter part of the NA session. The pair’s correction comes in response to an acceptable bounce in the US Dollar.

GBP/USD attempts some consolidation near 1.3350

GBP/USD is alternating gains with losses near 1.3350 on Thursday. The Greenback’s attempts to recover aren't really sticking, upbeat data or not, as traders stay confident that the Fed will deliver a 25 bps rate cut at its final meeting of the year.

Gold flat lines near $4,200 ahead of US PCE inflation release

Gold price (XAU/USD) trades on a flat note near $4,205 during the early Asian trading hours on Friday. Rising US Treasury yields and upbeat US jobs data cap upside for the precious metal. Traders might prefer to wait on the sidelines ahead of the key US inflation data. The US delayed the Personal Consumption Expenditures Price Index report for September, which will be published later on Friday.

XRP slides amid record on-chain activity, mixed technical signals

Ripple (XRP) is trading under pressure at the time of writing on Thursday, after bulls failed to break the short-term resistance at $2.22. The reversal may extend toward Monday’s low of $1.98, especially if risk-off sentiment persists in the broader cryptocurrency market.

Why the Fed may cut rates in December: Understanding the policy shift

The Fed has gone through a noticeable policy swing in recent months - from initiating a rate cut, to signaling a potential pause, and now shifting once again toward another cut in December. This has created understandable confusion among traders and investors trying to interpret the Fed’s reaction function.

XRP edges lower despite record on-chain activity and steady ETF inflows

Ripple is trading under pressure at the time of writing on Thursday, after bulls failed to break the short-term resistance at $2.22. The reversal may extend toward Monday’s low of $1.98, especially if risk-off sentiment persists in the broader cryptocurrency market.