Russia: Economic data on the rise

The ruble continues to appreciate and is now at a one-month high against the dollar.

There are of course room for further upside knowing the ongoing Russian economic recovery. 62 ruble for one dollar represents a decent target in the short-term. This current strengthening is due to the fact that investors are looking for yields and while most of the western rates are negative or almost. The ruble is definitely a very good opportunity and looks still undervalued.

Secondly, the current rebound in oil prices is driving investors towards Russia as its economy relies significantly in the black commodity. Today will also be released the July retail sales and markets estimate a sharp increase with a 2.9% m/m push. On an annualized basis the retail sales growth should remain deeply negative below -5% y/y because of last year strong downturn and the collapse of oil. Unemployment data are also expected today and should nonetheless remain around below 5.4%.

As a result, it seems that the Russian economy is well recovering. The Central Bank if Russia should now attempt to limit upside pressures on its currency. We expect a cut of the key rate towards 10% at the September meeting that will be held on the 16th. A deeper rate cut may also be anticipated.

Yann Quelenn – Market Analyst – Swissquote