The dollar and Euro on the local market are moving in different directions

On Thursday, 12 October 2017, the Bank of Russia established the following official exchange rates: the US dollar 57,9210 rubles, Euro – 68,5035 rubles. US dollar on the local market continued to decline, implementing a phase of weakening, in the range 57,50 -58,80 prevailing since mid-September. Euro hard konsolidiruyutsya around 68,50, reflecting the positive dynamics of the single European currency in the international currency market Forex.

In published yesterday a press release, the Bank of Russia noted a significant slowdown in inflation in September, it is connected with temporary factors such as high harvest of crops and the strengthening of the ruble. Also, the regulator noted signs of increasing willingness of consumers to increase spending. A very important phrase that the current dynamics of inflation forms the preconditions for further decrease in inflationary expectations, may signal the willingness of the regulator to continue the process of reducing the key rate. Rather, only the vector of monetary policy will be formed in the following scenario. Rate reduction by 0.25% at the October meeting of the Board of Directors and then again by the same amount – at the December meeting. The second component will depend on the dynamics of consumer prices towards the end of the year. As noted in the document, in the future, after the exhaustion of the disinflationary impact of temporary factors, inflation will hover around 4%, which fully meets the strategic objectives of the Bank of Russia. But in a sharp rise in consumer prices or increases in inflationary expectations, the regulator has reserved the right to act in accordance with the current situation, given the medium term risks of inflation deviation from the target both up and down.

Full agenda of the oil market has formed a positive dynamics of oil futures on both reference varieties, which is positive for the Russian ruble. Published on the eve of the September report, OPEC noted that the average daily production volume amounted to approximately 32.750 million barrels, and in 2018, the projected demand would reach 33.1 million barrels a day. Also stressed that the efforts of the parties to the agreement OPEC+ contribute to the continuing decline in world stocks of raw materials. Recently, various representatives of OPEC continue to display optimism regarding the implementation of the Covenant on the reduction of world production. But the rise to historic highs in production of shale oil in the US raises concerns of other oil producers. The Secretary-General of OPEC, Mohammed Barkindo to the American oil producers, says that some difficulties exist to implement the goal of achieving balance. The phrase about the possible need for “certain extraordinary measures” in the future, also says about the potential difficulties in the next phase of the plan.

Monetary factors in the Forex market supports the growth of the single European currency. Today will be the next President of the European Central Bank, Mario Draghi, which may make some adjustments to the dynamics of the Euro against the dollar, which tend to the upper boundary of the current trading range near the level of 1.1940.

In the first half of trading on the Moscow exchange the US dollar is trading in the range 57,60 – 57,90, the estimated range for EUR 68,30 – 68,90. In the case of maintaining the existing international Forex market trends, the dollar on the local market will tend to the lower limit of the predicted range, the Euro, respectively – to the top.

Alexander Egorov, currency strategist at Oanda.

The dollar and Euro on the local market are moving in different directions 12.10.2017

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