USD/RUB: Ruble outlook as Fed, Bank of Russia central bank diverge

The USD/RUB exchange rate remained in a tight range as traders reflected on the diverging Federal Reserve and Bank of Russia rates decisions. The pair was trading at 90.42 on Monday morning, much lower than the year-to-date high of 102.53.

The Federal Reserve delivered diverging monetary policy statements last week. In the United States, the Federal Reserve decided to leave interest rates unchanged between 5.25% and 5.50%. 

The Fed also signaled that it will deliver three rate cuts in 2024. Some analysts believe that the bank will deliver more cuts than three in 2024 as the economy slows. However, some analysts don’t see the need for rate cuts in 2024 since the economy is still strong.

The Russian central bank, on the other hand, moved in the opposite direction. It decided to hike rates by 100 basis points to 16% and warned that they will remain at an elevated level for a while. 

It has hiked rates in the past three meetings as it attempted to boost the Russian ruble value and cool an economy that is overheating. The bank has achieved some success in this as the ruble has gained by over 11% from its lowest point this year.

There are signs that the Russian economy is doing well even as the war in Ukraine continues. The unemployment rate has dropped to 2.8%, much lower than the US rate of 3.7%. This rate dropped as many Russian companies increased their investments in a bid to fund the war.

The most recent data showed that the country’s industrial production rose by 5.3% in October, helped by the robust drone manufacturing. In addition, the country is still selling oil at above the price cap of $60 as it managed to find Asian buyers like India and China.

USDRUB chart by TradingView

The USD to RUB exchange rate has been under pressure after the pair formed a double-top pattern at 102.35. It then moved below the neckline of this pattern at 91.63, the lowest point on August 17th. The pair then retested this level, which is a positive sign. 

It has also moved below the 50-day and 25-day Exponential Moving Averages (EMA), which is a bearish sign. The Relative Strength Index (RSI) has drifted downwards. Therefore, the outlook for the pair is bearish, with the next point to watch being 86.99, the lowest point in November.

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