Ruble Keeps Falling
All focus is on the Russian Ruble at the moment as the move to increase interest rates by 6.5% to 17% has caused turmoil on the markets. Yesterday was the single worst day in the last 9 months for Russia as the weakening of the Ruble continued and it is difficult to see where this is going to stop. The Ruble sank below 80 against the US Dollar, and the speed of the fall lends credence to the belief that policy makers are losing control. As Russia falls into stagflation, scenes of hundreds of Russians queuing up to take out Rubles out of their accounts and put them into US Dollars were avoided, although demand for foreign currencies was 3-4 times the daily average.
Yesterday saw stronger than expected figures out of Germany and the Eurozone. Eurozone manufacturing PMI rose to a 4-month high, services PMI came in better than expected as did German manufacturing PMI. This was in stark contrast to the US, where manufacturing PMI fell below expectations and matched the January 2014 low.
Results out of the UK were mixed with data showing that consumer price inflation rose at a rate of 1.0%, which is the slowest rate for 12 years. Fears were dispelled by Mark Carney who downplayed the figure commenting on the lost momentum of the housing market due to supply shortage but predicted that stamp duty changes and low rates could reverse this. Also, despite the risk to stability, Carney commented that the drop in oil prices could be beneficial as it could support economic growth.
It’s a big day for Sterling as we get the Bank of England minutes, average earnings and unemployment rate. We also have CPI from the Eurozone and US. Later on this evening, when Currency UK will be enjoying our Christmas Party, the Fed will announce their latest interest rate decision followed by a statement and press conference.