Russia continues to be affected by the fallout from the sanctions.

The Russian ruble has strengthened slightly in the past week due to the country's central bank raising its key interest rate to 16% amid heightened inflationary pressures and an upward trend. This is a result of labor shortages and increased lending. Additionally, the ruble has seen significant positive factors from mandating companies to convert their export earnings into rubles.

The Central Bank of Russia hiked its key interest rate by another 100 basis points to 16% in December, aligning with market expectations. This signals a prolonged tight monetary policy to combat rising inflation, which is expected to continue due to increased commodity prices driven by the heightened monetary policy. Loan costs are anticipated to remain high as a consequence. There are forecasts that inflation rates for this year will be below 7.5% before returning to the 4% to 4.5% range within 2024.

Russia's Gross Domestic Product (GDP) expanded by 5.5% from the previous year in the third quarter of the year, marking the fastest growth rate since the second quarter of 2021. This growth has been supported by the recovery of supply chains following Western sanctions and increased efforts to export oil.

The trade surplus of Russia reduced to $9.43 billion in October from $18.92 billion in the same month the previous year. This decline is due to continuous decreases in exports, influenced by G7 sanctions and a global economic slowdown. Additionally, crucial commodity prices such as oil and natural gas decreased, resulting in a 25.3% reduction in exports to $32.96 billion, while imports decreased by 6.5% to $23.53 billion.

The Russian central government ran a budget deficit of 878 billion rubles, compared to a surplus of 743 billion rubles in the same month of the previous year. Government spending increased by 11.7% to 26.841 trillion rubles, primarily due to higher military expenditures related to operations in Ukraine and government efforts to stimulate the economy following its recession. Revenues increased by 4.8% due to tax adjustments.

The 10-year yield of Russian bonds rose to approximately 12.7% in December, marking another one-month high. This increase was supported by the Central Bank of Russia raising its interest rate to 16%. The country's inflation rate accelerated to 7.5% year-on-year in November, significantly higher. Simultaneously, continuous conflicts and G7 sanctions decreased revenue from oil exports, a major income source for Russia, leading to increased government spending.

Techical analysis data (5H)

Resistance: 90.5179, 90.7227, 90.8904

Support: 90.1454, 89.9777, 89.7729

Source: Investing.com