RUB: Ruble to weaken modestly against the dollar - Wells Fargo

According to analysts from Wells Fargo, the Russian economy continued to gain momentum during the first quarter, as revealed today. They see the Russian ruble weakening against the US dollar and the Federal Reserve rising rates two more times in 2017. 

Key Quotes: 

“Economic data released this morning showed that Russian GDP in Q1 expanded 0.5 percent from a year ago. The headline figure bested the consensus expectation which called for more modest 0.4 percent growth. This print comes at the heels of 0.3 percent growth in Q4 2016 and marks consecutive quarters of positive GDP growth, a feat not achieved since Q3 and Q4 of 2014. Prior to Q4 2016, Russia’s GDP growth was negative for eight consecutive quarters. We expect Russian GDP growth to remain positive in the near term and to expand 1.3 percent and 2.0 percent in 2017 and 2018, respectively.”

“Inflationary pressures in Russia, as measured by the CPI, continue to subside. CPI inflation fell to 4.1 percent in April, its lowest rate of growth since May 2012. The core inflation index has followed suit, expanding just 4.1 percent in April, the lowest inflation rate since the index began in 2003.”

“The Russian ruble has demonstrated strength at the start of 2017, which should not come as a surprise given the rebound in oil prices. Because oil is Russia’s most important export, the value of the ruble closely traces the price of oil. Nonetheless, against the backdrop of a Federal Reserve, which is expected to hike rates two more times this year, and a likely accommodative Russian central bank, our currency strategy team expects the ruble to weaken modestly against the dollar.”