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USD/RUB: ruble outlook ahead of Fed and Russia rate decisions

By: Invezz
Russia Moscow Street

The USD/RUB exchange rate drifted upwards on Monday morning as traders reacted to the latest Russian election and the upcoming Federal Reserve meeting. The pair was trading at 92.50, its highest point since February 26th.

Putin wins election

The biggest news in Russia was that President Putin won another six-year term in a landslide. He received over 87% of the total vote, making him the longest-serving Russian leader. This victory was in line with expectations since Putin faced no major opposition. 

The Russian economy is doing well, helped by the soaring oil prices and government spending on the war machine. Russia earned about $15.69 billion in oil revenues in February alone, a small decline from the previous month. It sold over 4.75 million barrels of oil per day. 

Russia is selling most of its oil to India and China. India reduced its Russian oil purchases by about 420k barrels per day while China is buying over 2 million bpd. This is important since Russia makes most of its money from oil.

The Russian government is also spending billions of dollars in its war machines. Its factories are producing thousands of artillery shells every month. These weapons are then transported to Ukraine, where the military is making some substantial gains.

Looking ahead, the next important USD/RUB news will be the upcoming Federal Reserve and Central Bank of Russia decisions. 

The Fed will conclude its meeting on Wednesday and leave interest rates unchanged between 5.25% and 5.50%. It will then provide more signals on when it will start cutting rates now that inflation has remained at an elevated level.

The Central Bank of Russia will also deliver its decision on Friday. Economists polled by Reuters believe that the bank will leave rates unchanged at 16%. If this happens, it will be the third straight meeting that it has left rates intact. It has hiked them from last year’s low of 7.50%. 

USD/RUB technical analysisUSD/RUB

USD/RUB chart by TradingView

The daily chart shows that the USD to RUB exchange rate was trading at 92.50 on Monday, higher than the YTD low of 87.01. It has moved slightly above the 50-day and 25-day Exponential Moving Averages (EMA) and is nearing the crucial resistance at 93.50, the highest point in December.

The Relative Strength Index (RSI) has pointed upwards and is above the neutral level of 50. Therefore, the path of the least resistance for the pair is bullish, with the next point to watch being at 93.50. 

In the long term, however, a case for the Russian ruble can be made since it is earning 16% while inflation stands at 7%. This means that ruble holders are making a net of 9% return, which is a strong one. 

The only barrier to the Russian ruble surge is that there is a dollar shortage in Russia because of Western government sanctions.

The post USD/RUB: ruble outlook ahead of Fed and Russia rate decisions appeared first on Invezz

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