USD/RUB: Sanctions oblivion and weak consumer - Danske Bank

Analysts at Danske Bank forecast USD/RUB at 77.05 in 3M and at 79.56 in 6M. Regarding the Russian economy, they point out that growth components stay green, but growth is set to continue at a moderate level. 

Key Quotes: 

“Russia has been surprisingly left in ‘sanctions oblivion’ by the US. That allowed the enjoyment of a steady flow from portfolio investors to Russian assets and the RUB. As the EU continues to prolong its sanctions by half a year, economic agents have already priced the current ‘new normal’.”

“In June, the Bank of Russia (CBR) delivered a 25bp rate cut, lowering the key rate to 7.50% in line with our expectation and Bloomberg and Reuters consensus. The decision fortifies our call for two more 25bp cuts in 2019, making possible a total 100bp decrease in the key rate on a 12M horizon to 6.50%, if the current conditions hold.”

“Further geopolitical escalation, such as a worsening standoff with Ukraine, is a serious short- to medium-term risk for the RUB, Russian stocks and government debt. Upside risks come from an increasing oil price and a more dovish than expected central bank.”