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Macro week ahead – RUB behaviour is in focus amid thin dataflow locally


The behaviour of the Russian currency is to be in focus this week, after persistent pressure last week pushed the CBR to threaten ad hoc interventions, while on the data front we shall be watching for second tier releases on international trade and budget execution. All CE3 countries are scheduled to publish flash 3Q14 GDP estimates as well October CPI prints.

Pressure on RUB persisted throughout last week amid growing signs of an increase in the dollarisation of household savings. This, with other signs of rising devaluation expectations, prompted the CBR to intervene verbally and threaten ad hoc interventions in order to control the risks to financial stability. This is a welcome change in rhetoric, but we remain concerned that the market might want to test the regulator’s willingness to act and so await bold ad hoc FX interventions to break the negative loop of self-fulfilling depreciation spiral.

As for local news flow, we look to the second-tier data on international trade and budget executions. The former is set to be quite interesting, particularly as regards fresh estimates on imports in October, as we expect it to highlight how far the country has advanced in terms of internal rebalancing (i.e. import contraction). Once the CBR fends off the panic capital flight it is the trade balance and CA fundamentals that are to define the equilibrium exchange rate. In this regards we continue to believe that RUB has overshot and once the dust settles it will gravitate towards a fair value (which we estimate around 42–43 against USD).

Elsewhere in CEEMEA, all CE3 countries are expected to present flash 3Q14 GDP estimates as well as October inflation reports. Inflation remains subdued across the region amid still limited demand pressures, low inflation in trade partners as well as positive supply-side shocks in the commodity markets (both energy and food). In the meantime, growth is likely to have moderated slightly in 3Q14 on the back of the choking recovery in the euro area, while domestic demand probably remained resilient amid accommodative monetary and fiscal policy. Overall, the data is likely to support retaining an accommodative monetary stance for longer.

Vladimir Kolychev
VTB Capital analyst

ruble, GDP, CPI

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