Rouble turmoil causes high volatility and nervous trading

Tuesday, December 16, 2014

Russia surprised the global equity and commodity markets today following an announcement that the Russian central bank raised its key interest rate to 17% from 10.5%, effective today. The news caused high volatility and nervous conditions across global markets while the rouble initially rallied to 58.0 against the US dollar but reversed and came under renewed pressure towards 72.0.

USDRUB 1-year chart

USDRUB Curncy (Russian Ruble SPO 2014-12-16 16-17-31

USDRUB 3 Days -Tick

USDRUB Curncy (Russian Ruble SPO 2014-12-16 16-18-03

European equity markets fluctuated strongly in today’s trading session. At the time of writing, the CAC, DAX and the London equity benchmark remain in positive territory adding between 0.35% and 0.8% as robust European economic data overshadowed the uncertain economic conditions in Russia. 

On the macroeconomic front, we received fairly mixed economic data. In the US, manufacturing PMI fell to 53.7 in December compared to 54.8 in November, missing analysts’ expectations. Housing starts declined 1.6% in November against analysts’ estimates of a 3.1% increase. However, we received fairly solid economic data from Europe as Germany’s Markit manufacturing PMI rose to 51.2 in December from 49.5 in November. Moreover, the ZEW survey showed market expectations of German economy surged to 34.9 in December compared to 11.5 in November.

UK inflation fell to 12-year low

UKRPCJYR Index (UK CPI EU Harmon 2014-12-16 16-24-53

In the UK, the Consumer Price Index (CPI) showed inflation rate fell to a 12-year low of 1.0% y/y in November from 1.3% in October as crude oil prices and fuel costs fell. Please note that the Bank of England, which had an inflation target of 2%, has already warned market participants last month that the inflation rate could decline below 1% over the next six months.

Tomorrow, investors will be keeping an eye on the Greek Presidential elections as the first round of voting starts on Wednesday 17th December. However, the euro has held strongly above 1.25 against the US dollar in today’s session. 

EURUSD

EURUSD Curncy (EUR-USD X-RATE)   2014-12-16 16-22-03

More from: Myrto Sokou