Yesterday the US Fed wrapped up a two-day meeting. The Fed kept its rate at 1.25% and stated that it would start shrinking asset holdings in its balance sheet 'relatively soon', also saying that it will follow the plan announced in June. In June, the Fed set out a plan to cut Treasury bonds and mortgage-backed securities held in its balance sheet, which has ballooned to $4.5 trillion. The largest part of them was bought in the midst of the financial crisis and recession in 2007-2009. In addition, the regulator said in its statement that the pace of economic growth was moderate and job growth remained strong.
On the whole, the markets received no new data. Moreover, the markets might not have believed such optimism, considering the latest data, particularly data on inflation.
In the light of this, yesterday there was a sale of the US dollar against G10 currencies. The US Dollar Index decreased at some point to 93.29. Meanwhile, the SP500 index hit a historical high at 2479. The pound/dollar currency pair reached a target at 1.31 and keeps climbing. The Aussie also rose considerably against the greenback by reaching above 0.80 yesterday.
In the oil market, a buying frenzy died out. The statistics released yesterday by the US Energy Information Administration, in fact, confirmed the data published on Tuesday by the American Petroleum Institute. According to the EIA, crude oil inventories dropped by over 7 million barrels, whereas gasoline reserves decreased by over 1 million barrels.
In general, the situation is shaping up rather favourably for a continuing increase in oil prices. The US reserves have been declining for a fourth consecutive week. This also indicates the current driving season. This factor will be providing support presumably till the end of summer. In addition, the pace of US drilling activity has slowed down. According to the latest data from Baker Hughes, there is still an increase in drilling, however it is not that active.
From a technical perspective, Brent oil reached our guidemark at $50-51 per barrel. However, it may only be the start. Now opening quotes might be headed to 53-54within an uptrend.
The ruble was backed yesterday by increasing oil prices, however a surprise was also in the latest US Fed meeting minutes after which the US dollar rapidly declined against all major G10 currencies, including the ruble. In terms of the medium-term prospects, yesterday's step by the Fed in regard to its rate can be construed as a benefit for the ruble. The difference in the yields between assets in rubles and the ones in dollars will remain high, it will restrain the outflow of foreign capital even despite potential sanctions. Speaking of an upcoming meeting of the Bank of Russia on Friday, the regulator is expected to keep its rate unchanged, considering an uncertainty in the relations between Russia and the West, and in oil prices.
Technically in the short term for USD/RUB, we are to expect consolidation within a range of 58.70-60.40.
Ivan Kapustyanskiy, equity analyst at Forex Optimum