18.10.2019: RUB faces downward risks (Brent, USD/RUB)

18.10.2019: RUB faces downward risks (Brent, USD/RUB)


According to the latest economic data, the lingering trade war came at a high cost for China. Oil is trading steadily low as China reveals weak GDP growth. These factors may put the ruble at risk as well. China’s economic growth has reached its record low dropping to 6% in almost three decades. However, the markets’ reaction was rather mixed. In particular, S&P 500 futures went up while the yuan remained strong against the US dollar. Perhaps, the market participants considered the economic situation in China to be even worse. Besides, some positive economic readings from China might have offset the negative reaction of the traders. For instance, the data on industrial production has showed an unexpected increase to 5,6% in annual terms. The oil traders seem to be very disturbed with China’s slowest GDP growth recorded over the past 30 years. This may serve as a clear signal of a global economic slowdown and reduction in oil demand. Brent crude oil is currently trading near the multi-month lows, reaching 59 dollars 75 cents a barrel early in the session. Notably, traders did not react to the significant rise in the US crude stockpiles announced yesterday. Instead, the quotes moved up on the increased demand for risky assets caused by the news from the UK. The rising appetite for risk helped the ruble to hold shortly near the level of 63. However, a sharp slowdown in China’s GDP growth is unfavorable both for the Russian economy and its national currency. The ongoing trade war between the US and China results in a deterioration of macroeconomic indicators in both countries. This, in turn, does not encourage the demand for risky assets, including the ruble. The dollar/ruble pair opened today’s session at the level of 64.02. The Russian currency closes this week trading moderately stronger against the US dollar. Meanwhile, the ruble is expected to ease against the euro during today’s session. Since no economic news is expected today, the oil is likely to end the week below the level of 60, taking into account negative
data on GDP growth in China.

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