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12 Mar 2014
EMEA EM Express: Sanctions against Russia more and more likely to be implemented
Tensions in Ukraine continue, with the G7 announcing on Wednesday that the outcome of the referendum on Crimea's future would not be recognized, due to the fact that it violates the Ukrainian constitution and with an increasing possibility of the West imposing sanctions on Russia in response to the crisis.
Marc Chandler, Global Head of Currency Strategy at BBH offers a view on how Russia could suffer in case of a further escalation of the situation in Ukraine: “The consequences we have in mind are not sanctions by government, but punishment by impersonal market forces. Ironically, despite some claims that the US military buildup under Reagan led to the bankruptcy of the Soviet Union, arguably more robust analysis would give a more decisive role to the collapse in oil prices in the mid-1980s.”
“Russia is more integrated into the world economy that the Soviet Union ever was. This is a source of non-statist pressure on Russia. A decline in oil prices would be particularly helpful in this regard. There are calls for the US to relax export restrictions on crude oil and natural gas. “
Economic data
The Hungarian Central Statistical Office revealed on Tuesday that year-on-year inflation accelerated to 0.1% in February, after remaining unchanged the previous month. Core CPI rose 2.8%, down from 3.4%.
In the opinion of Andras Balatoni from ING: “Low inflation figures in 1H14 are likely to provide very low inflation on a yearly average, and thus the National Bank of Hungary will most probably miss the 3% inflation target.”
“According to our forecast, headline CPI will be close to 1% on a yearly average this year. Since our previous analysis suggested that the base rate decision will be data dependent, according to our view the NBH will continue the easing cycle in March, and even a 15bp cut is possible.”
On Wednesday, also the Slovak Republic released February inflation numbers which showed a 0.3% rise on an annual basis, following a 0.4% increase. Headline CPI dropped by 0.1%, after remaining flat.
Turkey's current account deficit narrowed from $-8.32B seen in December to $-4.88B in January. Romania's trade deficit narrowed from €-0.495B to €-0.250B and Hungary's trade surplus widened from €289.8M to €461.4M.
Technicals
USD/UAH and USD/RUB rose yesterday while USD/CZK, USD/HUF, USD/PLN and USD/TRY extended losses.
The daily FXStreet Trend Index for USD/RUB is slightly bullish, with the OB/OS Index neutral. RSI was neutral at 71.0451 at the last close. Daily 2-StDev Volatility Bandwidth is shrinking at 4782 pips, with ATR (14) shrinking at 3496 pips. The 1D 200 SMA is at 33.1675, while the 1D 20 EMA is at 35.8313.
The USD/UAH daily FXStreet Trend Index is slightly bearish, with the OB/OS Index neutral. Daily 2-StDev Volatility Bandwidth is shrinking at 1.6956, with ATR (14) shrinking at 1725 pips.
Meanwhile, the daily FXStreet Trend Index for USD/PLN is slightly bullish, with the OB/OS Index neutral. RSI was neutral at 50.4245 at the last close. Daily 2-StDev Volatility Bandwidth is shrinking at 160 pips, with ATR (14) shrinking at 275 pips. The 1D 200 SMA is at 3.1282, while the 1D 20 EMA is at 35.3.0431.
Marc Chandler, Global Head of Currency Strategy at BBH offers a view on how Russia could suffer in case of a further escalation of the situation in Ukraine: “The consequences we have in mind are not sanctions by government, but punishment by impersonal market forces. Ironically, despite some claims that the US military buildup under Reagan led to the bankruptcy of the Soviet Union, arguably more robust analysis would give a more decisive role to the collapse in oil prices in the mid-1980s.”
“Russia is more integrated into the world economy that the Soviet Union ever was. This is a source of non-statist pressure on Russia. A decline in oil prices would be particularly helpful in this regard. There are calls for the US to relax export restrictions on crude oil and natural gas. “
Economic data
The Hungarian Central Statistical Office revealed on Tuesday that year-on-year inflation accelerated to 0.1% in February, after remaining unchanged the previous month. Core CPI rose 2.8%, down from 3.4%.
In the opinion of Andras Balatoni from ING: “Low inflation figures in 1H14 are likely to provide very low inflation on a yearly average, and thus the National Bank of Hungary will most probably miss the 3% inflation target.”
“According to our forecast, headline CPI will be close to 1% on a yearly average this year. Since our previous analysis suggested that the base rate decision will be data dependent, according to our view the NBH will continue the easing cycle in March, and even a 15bp cut is possible.”
On Wednesday, also the Slovak Republic released February inflation numbers which showed a 0.3% rise on an annual basis, following a 0.4% increase. Headline CPI dropped by 0.1%, after remaining flat.
Turkey's current account deficit narrowed from $-8.32B seen in December to $-4.88B in January. Romania's trade deficit narrowed from €-0.495B to €-0.250B and Hungary's trade surplus widened from €289.8M to €461.4M.
Technicals
USD/UAH and USD/RUB rose yesterday while USD/CZK, USD/HUF, USD/PLN and USD/TRY extended losses.
The daily FXStreet Trend Index for USD/RUB is slightly bullish, with the OB/OS Index neutral. RSI was neutral at 71.0451 at the last close. Daily 2-StDev Volatility Bandwidth is shrinking at 4782 pips, with ATR (14) shrinking at 3496 pips. The 1D 200 SMA is at 33.1675, while the 1D 20 EMA is at 35.8313.
The USD/UAH daily FXStreet Trend Index is slightly bearish, with the OB/OS Index neutral. Daily 2-StDev Volatility Bandwidth is shrinking at 1.6956, with ATR (14) shrinking at 1725 pips.
Meanwhile, the daily FXStreet Trend Index for USD/PLN is slightly bullish, with the OB/OS Index neutral. RSI was neutral at 50.4245 at the last close. Daily 2-StDev Volatility Bandwidth is shrinking at 160 pips, with ATR (14) shrinking at 275 pips. The 1D 200 SMA is at 3.1282, while the 1D 20 EMA is at 35.3.0431.