The Russian ruble started gaining against the greenback yesterday after recent calls were made to bring back Moscow into the G7 group. Following the invasion and takeover of Crimea, Russia was booted out of the group of eight economies in 2014.
With support building, Russia might return to the group and begin formal interaction with other industrialized countries. Impressive economic growth and substantial wage rises are also assisting the ruble to strengthen against the greenback.
Yesterday, during a meeting with Klaus Iohannis, the Romanian President, President Donald Trump once again expressed his support for reinstating Russia in the G7 group. Trump believes that it would be relevant to have the Russian President Vladimir Putin at the round-table, instead of being isolated from the global community.
Trump also believes that Putin outmaneuvered Barack Obama convincingly. In the past, Trump had voiced his support in favor of bringing back Russia into the G7 group. “Whether you like it or not, and it may not be politically correct, but we have a world to run. And in the G-7, which used to be the G-8, they threw Russia out. They should let Russia come back in because we should have Russia at the negotiating table.”
The US President will be traveling to France this week to attend the annual G7 meeting. During the G7 meeting, Trump is expected to raise the issue with his counterparts from Canada, Great Britain, Germany, France, Italy, and Japan.
In addition to political developments, economic data also favored the ruble. The Russian Federal State Statistics Service stated that the country’s GDP grew 1.7% in July 2019, from the year-ago period. In June, the economy grew 0.8% on a y-o-y basis. The agriculture and construction sector contributed to the growth. Retail sales grew only 1% in July, slightly down from 1.4% growth recorded in June.
The unemployment rate inched up 0.1% to 4.5% in July. However, real wage growth increased 3.5% on a y-o-y basis, surpassing market estimates of 2.3%. The positive economic data indicates that the country could avert a recession this year.
However, in a research note to clients, the Stolypin Growth Economic Institute still cautioned the possibility of a recession this year: “Considering the current economic policy (tight fiscal policy and stringent monetary policy) and a weak effect of National Projects, a technical recession may be seen in the economy as early as in 2019, instead of 2021 projected by the Economic Development Ministry.”
The positive economic data and favorable political developments are expected to keep the ruble bullish in the short-term.
The historical price chart indicates that the USD/RUB pair is facing resistance at 65.80. Furthermore, the stochastic RSI indicator is in the overbought region. As a result, we can expect the currency pair to move down in the short-term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
