RUB now looks fragile, bullish in the longer run – Danske Bank

Sverre Holbek, Senior Analyst at Danske Bank, noted the recent drop in the Russian currency although the longer term prospects appear constructive.

Key Quotes

“Russia’s rouble saw significant pressure yesterday as the USD/RUB spiked 1.2% within a few hours as more than half of the EU countries, the US and Ukraine announced they are expelling more than 100 Russia’s diplomats in support of the UK’s allegations against Russia in the nerve agent poisoning case on the British soil. Australia and Canada have also joined the action of expelling several Russian diplomats. US President Donald Trump has also ordered for Russia’s consulate in Seattle to be closed”.

“As we have been pointing out, the major mover for the RUB in the near term remains geopolitics. In the current setup, we recommend being RUB sellers before Russia’s response appears as we could easily see a tit-for-tat escalation. Yet, looking at Russian macro fundamentals, we remain RUB bullish in the long term”.