On Friday, the Russian ruble opened down on a moderately negative external background. After Friday, the ruble continued to lose its positions. This happened while the situation on world markets improved rapidly. Experts claim that one of the major reasons for it is the increasing scares for sanctions against Russia.
The increase of the USD can also be a result of the new decision of US lawmakers, saying that an agreement was reached to provide $900 billion in aid aiming at supporting American citizens and businesses amid the negative impact of the pandemic.
The recent movements in the market indicate that the price of the USD/RUB is up about 1%, selling at about 73.5875. There are many things that have had an impact on the increase of the USD. Recently, the Bank of Russia, CBR, decided to leave the door open for a little more easing.
The statement of the Governor once again implies that the bank will continue having a cautious approach and the key rate will remain on hold at 4.25%. A new set of sanctions is one of the main risks in 2021, and some of the experts are claiming that next year, the price of the ruble will go back to around 60.8833.
Before making any decisions on your positions, however, make sure to use technical and fundamental indicators for the best outcome.
Price movements of USD/RUB
The candlestick chart shown above indicates the price changes of currency pair USD/RUB starting from August 18 to today. As you can see from the chart above, the price of the currency pair has started increasing around August 18, after which, it hit hights around August 25.
After this, the prices started going down again. At the beginning of September, it increased again, before decreasing around September 12. Around September 20, the prices started increasing again and had an uptrend for several days. For much of October, the price was very much unstable.
It changed several times, before going up at the end of the month. One of the major reasons for it was the US presidential elections, which had a huge impact on the prices in November. A new president was elected in the United States, Joe Biden. Because of the situation in the USA, USD started dropping in many pairs.
It included USD/RUB as well, and as you can see, the prices were very much decreasing until recently. Today, the price of the currency pair started increasing once again. The increase was as much as 1%. The ruble has been on a good run for some time now. However, it has fallen quickly.
During the trading day, other emerging currencies were actively declining as well. However, some of them switched to rapid corrective growth, unlike ruble. One of the major supporters of the increase of other emerging currencies was the situation on the world markets. Recently, the Russian debt market has also returned to a downward trend.
The ruble is predicted to stay under pressure by leading experts in the market. This is true at least in short term. The decision of the Bank of Russia will leave a key rate unchanged at a record low level of 4.25%. Also, the central bank has toughened the rhetoric and the regulatory body will assess the feasibility of further cutting the key rate.
In addition, the Bank of Russia has also confirmed the termination of the phase of easing monetary policy, taking a pause for an indefinite period. Although it could support the ruble in the long term, the short term effect of it is negative for the Russian currency. The main reason for it is that the government bond market has lost its driver of lower yield on expectations of a lower-key rate.
However, because of the political and economical uncertainty, it is very hard to predict anything. The number of Covid-19 cases is increasing very fast around the world, creating further problems. As of now, many countries have already adopted restrictions on mobility for the second time. Some even said that the third wave of the Covid-19 has begun, for example, in Poland.
But, there is some positive news as well. One of them is the increasing hopes for the Covid-19 vaccine, which was already used in the United States and in the United Kingdom. Most of the countries are planning to start vaccinating around the end of the year or earlier next year.
This could help the current situation of the financial markets, however, at this point, everything is a lot harder to predict.
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US House passes new stimulus bill, new vaccine on the way
House Democrats recently passed the $1.9 trillion American Rescue Plan. The voting took place on Saturday morning. The new plan envisages a third stimulus check up to $1400 for taxpayers and their dependents. Those earning up to $75,000 will receive a check of $1,400.
Those who earn over $100,000 a year won’t receive a stimulus check. The payments will be based on either 2019 or 2020 income. The bill now should be voted in the Senate, the Democratic representatives are hoping for Biden to sign the Stimulus around March 14.
Biden should not have a problem passing the plan, as both the House and Senate are controlled by Democrats. The Stimulus plan provides a huge infusion of the US Dollar into the economy, which, theoretically, should be able to push the value of the USD. Some experts are saying that it could have a positive influence, considering the effect of the previous stimulus. However, in the long run, it is hard to say exactly how the plan will influence the state of USD.
Finally, the House just passed the #AmericanRescuePlan to provide Americans with urgent relief and bold solutions that match the severity of this once-in-a-hundred-year-crisis.
Read Chairman @RepRichardNeal's full statement
— Ways & Means Committee (@WaysMeansCmte) February 27, 2021
Traders should try to focus on the ongoing events and indicators to make sure that they are following the current trends.
Influence of stimulus on USD
Compared to the previous weeks, the greenback is showing fair stability. Although the prices dropped slightly, it was not enough to cut down the last Friday’s biggest gain seen in the US dollar index since June 2020. The US Dollar Index measures the USD against a basket of major currencies.
It has dropped slightly about 0.04%. The retail traders are focusing on different types of indicators, while also looking an eye on the US bond markets, while have gained yearly highs. This is increasing the global economic recovery hopes from Covid-19. The moves in the bond trading market are helping the economic data as they represent massive drivers for the currency market.
The treasury yields also seem to be well ahead of economic fundamentals. Despite a strong US economy, there are some experts that are claiming that the US might weaken in the coming weeks. What will happen is very hard to say due to the swift changes happening in the market.
If the US Stimulus package manages to strengthen the US economy, it could potentially help the state of the US dollar as it can increase the demand on USD. However, the ongoing events around the world, including higher hopes for vaccination to speed up, might change the expectations.
Covid-19 in USA & Vaccination
Up until now, there were two vaccines available for US citizens – Moderna and Pfizer. Recently, Jonhson & Johnson’s vaccine was also passed by CDC. The first shots of the J&J vaccine could be administered as early as Tuesday, the representatives of the Biden administration are claiming.
However, the representatives also noted that in the beginning, the distribution might be a little uneven. J&J noted that they are expected to deliver as much as 4 million shots this week only. By the end of the month, the company plans to deliver 20 million shots.
So if you are comparing headline efficacy numbers, you are comparing apples to oranges
This vaccine is safe, highly effective
My older cousin with comorbid conditions called me today saying he's eligible for vaccination and wonders if he should get J&J if available
— Ashish K. Jha, MD, MPH (@ashishkjha) February 27, 2021
The rollout of the new vaccine gives the US further hopes for getting out of the situation. However, how fast the country will manage to vaccinate its population is unknown.
British Pound and Euro Remain Under Pressure
Markets Open Slightly Up Amid Persistent Inflation Concerns
Following a turbulent week on Wall Street that has so far seen something of a sell-off in many major growth names, Wednesday is bringing a sense of calm to both equities and the forex market. With that said, the USD remains marginally stronger as treasury yields continue to increase. This has led to renewed pressure on the Euro, and high-flying Pound both. All of this comes as Federal Reserve Chief Jerome Powell has continued to reiterate his stance to firmly support the economy with no fiscal tightening measures imminent. These comments stirred markets that opened slightly higher several days ago.
Euro Weakness Remains Despite Positive Data
Upward revisions of German GDP data for the 4th quarter of 2020 brought some much-needed positivity to the Eurozone economically and supported a Euro that has displayed consistent weakness as the bloc continues to struggle slowly through the COVID-19 pandemic. The figures showed an improvement of 0.3% on a quarter by quarter basis, up from the earlier number of 0.1%. The year-on-year number was also revised to show an economic contraction of 2.7%, down from the initial figure that was a negative 2.9%.
These numbers have delivered a much-needed boost to the region and its largest economy although it has barely been reflected in the strength of the common currency which is struggling below 1.2150 as the US treasury yields ticked higher and in a move that has strengthened the Greenback.
Sterling Slides From Record Highs
Unlike its EU counterpart, forex trading in the British Pound has been rampant since Brexit was finally realized. Overnight the currency hit new multi-year highs though it has dropped back significantly at the start of Wednesday mainly due to increased strength in the Dollar, and a somewhat over-zealous hope that the UK is fast-tracking the removal of restrictions amid their successful vaccination campaign.
This, along with an idea that the Bank of England will move to increase rates sooner rather than later would appear to be nothing more than rumor, and the quick spike that was noted overnight has faded this morning just as fast. With that said, the Pound still remains in a very strong position at above $1.41, and forex brokers note it is holding much better than the Euro against a strengthened Dollar.
Market Bounces Back on Supportive Comments
Buoyed by a supportive congress testimony given by the chief of the Federal Reserve on Wednesday, major names on Wall Street have bounced back slightly following a difficult start to the week. There has been much talk of inflation ahead and this would seem to have spooked some as particularly high-flying tech names sold-off yesterday.
Powell though commented that the Fed remains completely supportive of the economy with no plans to raise interest rates and distanced himself from the idea that inflation is a concern. This seems to have helped the markets bounce back today as they opened marginally higher.
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