CBR preview: Easing space is still there – Nordea

Sandeep Kanihama FXStreet Contributor

Tatiana Evdokimova, analyst at Nordea Markets, suggests that together with the market, they are expecting the Bank of Russia to cut the key rate by 25bp on Friday.

Key Quotes

“Modest economic performance and moderate inflation pressure give hope for a continuation of the easing cycle in 2020.”

“External conditions have deteriorated significantly since the previous CBR key rate meeting on 26 July. Trade tensions between the US and China escalated sharply with a fresh round of tariffs with effect from 1 September and another wave promised by the middle of December.”

“The CBR has repeatedly mentioned external conditions as a potential source of risks. Even though the developments since the previous meeting have been worrisome, they still don’t outweigh internal circumstances that speak firmly in favour of a rate cut.”

“Another -25bp move will bring the key rate to 7%, its lowest level since early 2014. The move is widely expected by the market. The difference between the current 3-month Mosprime rate and a 3-month forward rate in 3 months’ time is currently 28bp, suggesting at least 1 cut priced in for the next 3 months.”

“The message from the CBR about its future monetary stance will be much more important to the market than the decision itself as it will signal to the market further moves from the CBR. The expected cut will bring the key rate to the upper bound of the neutral range of 6-7% repeatedly mentioned by the CBR. The neutral rate that neither accelerates nor slows economic growth is an unobserved indicator that is usually found by trial and error.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.