Russian Ruble: Trade boost from Oil seen fading – Commerzbank

FXStreet Insights Team FXStreet

Commerzbank’s Tatha Ghose reports Russia’s June merchandise trade surplus rose to USD 12.5bn, up over 50% year-on-year, as higher Oil prices and improved Urals pricing supported exports. IMF trade data confirm a jump in exports and surplus by April, but he cautions the improvement is not trend-altering and may fade as export prices ease. With USD/RUB only weakly tied to fundamentals, he expects continued Ruble depreciation over the coming year.

Oil-driven trade gains lack durability

"Russia’s June merchandise trade data show that the rise in the oil price and better Urals price realisation since March began to have a positive effect on the trade balance since around April. According to the latest official data, the merchandise trade surplus reached USD 12.5bn in June (up by 52.3%y/y)."

"We still choose to showcase the IMF’s Direction of Trade Statistics for trends in Russian trade (as opposed to local Russian statistics, whose reliability became questionable – partly because of stated official policy – since the Ukraine war began). The IMF data are delayed, which means that the latest available data are for April rather than June. Still, one can observe the effect already by April."

"The up to date official data suggest that the trade balance has not improved much further since then and may, in fact, begin to fade in July as the oil export price begins to average lower. Crucially, our chart shows that the trade balance improved to a multi-year high, but did not really increase to a level beyond what Russia had enjoyed in preceding years."

"In this sense, the development is not “trend altering” although better Urals pricing did help the Russian economy. The USD/RUB “technical fix” began to drift up around the same time because the geo-political environment deteriorated, while the exchange rate has only a weak link to underlying trade fundamentals. We expect the ruble to keep depreciating over the coming year."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

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.

AUD/USD flirts with 0.7000, lowest since early August amid bullish USD

AUD/USD hits a fresh low since early August during the Asian session on Friday and looks vulnerable near 0.7000 after breaking below the 200-day SMA overnight. Against the backdrop of the hawkish Fed, a two-day rally in oil prices revives inflation fears and continues to push US bond yields to multi-year highs. Adding to this, geopolitical risks lift the US Dollar to a two-month high, overshadowing RBA rate hike bets and weighing on the pair.

USD/JPY pulls back from three-week high after failing near 159.00

USD/JPY edges lower during the Asian session on Friday, stalling its recent strong move to a three-week high of 159.00 as Japanese Yen bears turn cautious amid intervention fears. Meanwhile, the US Dollar retains a strong bullish undertone as the Fed's hawkish outlook and oil-driven inflation fears continue to push US bond yields to multi-year peaks. Furthermore, the BoJ's dovish rate hike last week might cap JPY and support spot prices.

Gold treads water below $4,300

Gold grabs some buying attention and advances marginally at the end of the week, partially retracing the weekly decline, although it is still navigating below the key $4,300 mark per troy ounce. The fresh selling bias on the Greenback and the modest decline in US Treasury yields appear to support the humble advance in the precious metal.

Week ahead: Rate hike bets face a crucial data week

Despite the solid drop from the mid-September high, oil prices remained in the driver’s seat for another week, setting the tone in financial markets. Six months have passed since the late-February start of the US-Iran conflict, and there is still no breakthrough in the stalled talks, despite pressure from regional leaders and the rest of the world.

CFTC Report: Defensive currency positioning takes hold

The week in one sentence: Sterling and Euro shorts deepened in the week to September 22, while Yen longs were cut sharply. Oil positioning improved despite a steep price decline, and Gold exposure remained crowded. The main signal was a more defensive currency positioning backdrop.

Fed vs BoJ: Both hiked. The market only believes one of them – and the chart shows which

The Fed and the BoJ have just done something remarkably similar. Both central banks raised interest rates by 25 bps last week, both are confronting inflation risks, and both signal that future decisions will depend on incoming economic data.