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Russian Rubble

Russian Rubble

In yesterday’s trading USD was the biggest mover of the majors. The Federal Reserve’s update to the Labor Market Conditions Index (LMCI) showed greater improvement in labor markets over the past six months than previously estimated. At its current cycle average, the LMCI will return to pre-crisis levels within the next year, broadly in line with our outlook for an initial Fed rate hike in mid-2015. This new index is considered a broader gauge of employment conditions than the unemployment rate.

The Russian Ruble (RUB) was another notable outperformer yesterday as the Central Bank of Russia (CBR) announced the abolition of the FX intervention mechanism and the RUB basket band, completing its multi-year transition towards inflation targeting and a free floating RUB. Depreciation pressures from fundamental factors, including lower oil prices and Western sanctions, are likely to remain with RUB depreciating against GBP a massive 13% in the last month – hence the title of this piece.

The only major ‘data’ today, actually this evening UK time, is the scheduled speech by Graeme Wheeler, Governor of the Reserve Bank of New Zealand (RBNZ) . As with all central bankers, his words may give the markets a hint on future RBNZ interest rate policies and hence the relative future attractiveness of NZD.

Looking to tomorrow’s data the BoE Inflation Report (Wed 10.30am) may not be constructive for GBP – lower energy prices, a slight cooling in activity and lower actual inflation trends flag a less hawkish (less inclined to raise interest rates) BoE position in the Inflation Report.

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