War Tensions and the Ruble

Following Russia’s seizure of three small Ukrainian naval vessels and 23 sailors yesterday, Ukraine’s president asked Parliament for martial law to be declared, starting tomorrow. Parliament approved this, by a vast majority of those present, after the president agreed to dilute its scope. The big question mark refers to the stance of the US and Europe, with the Trump administration appearing to be unwilling to increase pressure on Russia, although more definite views on this will be seen once the G20 summit is over.

It is certain that markets do not like tensions. The Ruble stopped its long-term positive trend with respect to the Dollar and lost close to 2% in just three days, after breaking the RUB66.1 (Fib. 50.0%) barrier. The next Resistance point stands at 67.14 (Fib. 61.8%) even though this will heavily depend on whether tensions go to the next level or not. The G20 summit could be critical on the future of the Ruble, given that countries may choose to restrict trade relations with Russia in the coming months, even though the US does not appear to be willing to escalate, especially given the fact that sanctions have already been imposed on the country.

On the economics of the Ruble, bear in mind the important interest rate differential of the two countries which can affect trades. On this, all eyes are on the Fed now to see whether a rate hike will take place in December.

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Dr Nektarios Michail

Market Analyst


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