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The USD/RUB price declined on Friday after the Russian Central Bank made a surprise interest rate hike. The pair dropped to 73.80, which was 1% below the intraday high of 74.69.
Bank of Russia rate hike
The Bank of Russia (BOR) concluded its two-day monetary policy meeting with a surprise rate hike. The bank pushed interest rates by 25 basis points from 4.25% to 4.50% in its attempt to battle the rising inflation.
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Most economists were expecting the bank to leave interest rates intact but sound hawkish. They expect that it will still hike rates to 5.5% and even 6% later this year. Today’s rate hike shows that central banks change their minds regularly. In its past rate decisions, the bank guided to low-interest rates until 2022.
The BOR becomes the third major emerging market central bank to raise rates this week. Yesterday, the Brazilian central bank made a surprise rate hike to 2.50% while the Turkish Central bank hiked to 19.0%. This is a divergence from what developed countries central banks like the Fed, Bank of Japan, and Bank of England (BOE) did this week.
EM central banks are at crossroads. The recent surge in oil prices has led consumer prices to rise faster than expected. At the same time, the countries are facing substantial unemployment because of the pandemic. Most importantly, the countries are facing high borrowing rates as bond yields in the developed countries rose. The bank said:
“Given the current monetary policy stance, annual inflation will return to the Bank of Russia’s target close to 4% in the first half of 2022 and will remain at that level further on.”
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USD/RUB technical forecast
The USD/RUB has been under pressure recently as forex investors anticipate more tightening. Today, the pair dropped from a high of 74.50 to a low of 73.73. On the four-hour chart, it is slightly above the 25-day moving average and the important support at 73.73.
The price also moved slightly below the standard pivot point. Therefore, there is a possibility that the pair will keep falling as bears target the first support of the pivot point at 72.85. This is 1.50% below the current level. On the flip side, this prediction will be invalidated if it moves above today’s high of 74.50, which is also at the first resistance level.
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