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19 Mar 2014
EMEA EM Express: Russian stocks up on hopes that conflict with Ukraine is receding
FXStreet (Łódź) - Yesterday's speech delivered by Russian President Vladimir Putin before parliament didn't leave much doubt about the fate of Crimea, which after the Sunday referendum is quickly moving towards becoming part of Russia and adopting the ruble as its official currency. The West meanwhile is acting quite slowly, announcing more sanctions and expressing their indignation with the events in Ukraine.
It is expected that by this weekend Crimea will formally join the Russian Federation. According to Lee Hardman, Currency Analyst at BTMU: “The move increases the likelihood of more affirmative sanctions from the West which could hit the Russian economy given that it represents the first annexation of another European country’s territory since the second world war.
“However, investors have drawn some reassurance from comments from President Putin stating that 'we don’t need the division of the Ukraine'. Russia has also signaled that they are ready to offer reconciliation in the rest of the Ukraine in exchange for Crimea, proposing military neutrality for Ukraine, a federal structure giving greater power to the regions and making Russian a second state language.”
Russian stocks climbed for the second day on Tuesday, with MICEX gaining 4.1%, while the ruble reversed earlier losses.
Meanwhile, the Turkish central bank left interest rates unchanged at 10% for the second running month at the monetary policy meeting held on Tuesday, after raising them sharply from 4.5% in January. This was widely expected and “signaled the continuation of tight monetary policy on the back of a worsening inflation outlook,” as Muammer Komurcuoglu from ING remarks.
The analyst adds: “Given that inflation will continue to be well above the 5% target on the back of the unfavourable outlook in food prices and pass-through from the weak TRY, we expect the CBT to keep rates at these relatively
higher levels even with some additional steps on the tightening front in the period ahead.”
Economic data
Polish Corporate Sector Wages growth accelerated to 4% in February, from 3.4% in January, according to data released by the the Central Statistical Office on Tuesday.
On Wednesday Polish Industrial Output numbers published on Wednesday showed a 5.3% rise year-on-year, up from the previously recorded 4.1% increase. The annual Producer Price Index revealed a 1.4% drop, following a 0.9% decline.
Also on Wednesday South Africa released inflation data for February. On a monthly basis CPI climbed 1.1%, up from the 0.7% rise, while year-on-year CPI ticked up 5.9%, following +5.8%.
Technicals
The Russian ruble rose 0.7% against the Russian central bank's target basket of dollars and euros yesterday. USD/RUB fell by 0.77% to 35.95.
The daily FXStreet Trend Index for USD/RUB was slightly bullish, with the OB/OS Index neutral. RSI was at 60.9835 at the last close. Daily 2-StDev Volatility Bandwidth was shrinking at 3214 pips, with ATR (14) expanding at 3527 pips. The 1D 200 SMA is at 33.2722, while the 1D 20 EMA at 36.0618.
The Turkish central bank's decision was met by a muted market response and the USD/TRY remained practically unchanged around 2.20 levels.
The daily FXStreet Trend Index for USD/TRY was strongly bullish, with the OB/OS Index neutral. RSI was at neutral at 51.1680 at the last close. Daily 2-StDev Volatility Bandwidth was shrinking at 168 pips, with ATR (14) shrinking at 268 pips. The 1D 200 SMA was at 2.0513, while the 1D 20 EMA at 2.2161.
It is expected that by this weekend Crimea will formally join the Russian Federation. According to Lee Hardman, Currency Analyst at BTMU: “The move increases the likelihood of more affirmative sanctions from the West which could hit the Russian economy given that it represents the first annexation of another European country’s territory since the second world war.
“However, investors have drawn some reassurance from comments from President Putin stating that 'we don’t need the division of the Ukraine'. Russia has also signaled that they are ready to offer reconciliation in the rest of the Ukraine in exchange for Crimea, proposing military neutrality for Ukraine, a federal structure giving greater power to the regions and making Russian a second state language.”
Russian stocks climbed for the second day on Tuesday, with MICEX gaining 4.1%, while the ruble reversed earlier losses.
Meanwhile, the Turkish central bank left interest rates unchanged at 10% for the second running month at the monetary policy meeting held on Tuesday, after raising them sharply from 4.5% in January. This was widely expected and “signaled the continuation of tight monetary policy on the back of a worsening inflation outlook,” as Muammer Komurcuoglu from ING remarks.
The analyst adds: “Given that inflation will continue to be well above the 5% target on the back of the unfavourable outlook in food prices and pass-through from the weak TRY, we expect the CBT to keep rates at these relatively
higher levels even with some additional steps on the tightening front in the period ahead.”
Economic data
Polish Corporate Sector Wages growth accelerated to 4% in February, from 3.4% in January, according to data released by the the Central Statistical Office on Tuesday.
On Wednesday Polish Industrial Output numbers published on Wednesday showed a 5.3% rise year-on-year, up from the previously recorded 4.1% increase. The annual Producer Price Index revealed a 1.4% drop, following a 0.9% decline.
Also on Wednesday South Africa released inflation data for February. On a monthly basis CPI climbed 1.1%, up from the 0.7% rise, while year-on-year CPI ticked up 5.9%, following +5.8%.
Technicals
The Russian ruble rose 0.7% against the Russian central bank's target basket of dollars and euros yesterday. USD/RUB fell by 0.77% to 35.95.
The daily FXStreet Trend Index for USD/RUB was slightly bullish, with the OB/OS Index neutral. RSI was at 60.9835 at the last close. Daily 2-StDev Volatility Bandwidth was shrinking at 3214 pips, with ATR (14) expanding at 3527 pips. The 1D 200 SMA is at 33.2722, while the 1D 20 EMA at 36.0618.
The Turkish central bank's decision was met by a muted market response and the USD/TRY remained practically unchanged around 2.20 levels.
The daily FXStreet Trend Index for USD/TRY was strongly bullish, with the OB/OS Index neutral. RSI was at neutral at 51.1680 at the last close. Daily 2-StDev Volatility Bandwidth was shrinking at 168 pips, with ATR (14) shrinking at 268 pips. The 1D 200 SMA was at 2.0513, while the 1D 20 EMA at 2.2161.