Economic pressure from developed countries was unprecedented. The Russian Federation has become the absolute record holder in terms of the number of sanctions imposed on it, bypassing countries such as North Korea and Iran.
In response to the sanctions policy, the ministers limited the capital account, greatly inflated the interest rate and allowed commercial banks to introduce a commission for storing dollars and euros (about 12% per year), without the possibility of withdrawing cash (only in rubles, at the rate of the Central Bank) .
Naturally, a cash currency market appeared, the spread of which at the current price is about 10 rubles.
The high volatility of the national currency and the withdrawal of Western firms hit imports catastrophically, while exports continued to bring in large foreign exchange earnings due to high energy prices.
Thus, we got an artificial strengthening of the ruble, for which we created all the necessary macroeconomic conditions - a huge positive trade balance. The state budget also remained in surplus for a long time.
After the onset of 2023, all past "pros" for the ruble were not viable. The Central Bank lowered the key interest rate to 7.5%, the trade balance has ceased to be published since March 2022. Thus, we observe 2 important factors:
1) The state budget deficit, which in January already received 65% of the entire projected deficit for 2023.
2) QE, which was launched by the Central Bank to finance budget gaps through REPO.
Of course, the government has a special fund to cover the budget deficit, but its liquid part is 6.5 trillion rubles, while the budget deficit, only in January, amounted to 1.76 trillion.
In this case, the government has already begun sequestering the budget, with the exception of military and power items. However, this is not enough in the face of the loss of major sales markets and declining energy prices.
Gas prices in Europe fell below $600, and URALS oil fell below $60, although back in November they were $83.
Under these conditions, the government is left with few options:
1. Significantly reduce military spending and neutralize the budget deficit.
2. Significantly weaken the ruble to restore lost income.
3. Strengthen the hidden QE program.
4. Spend the entire stabilization fund.
I would like the reader to understand that there is a social contract in the Russian Federation - although social security is insignificant, and payments are minimal, they must be carried out impeccably, since violation of this contract entails political risks.
All 4 options, with the exception of the 1st, look the most realistic, with a possible combination. Under these conditions, I do not see other scenarios, except for the continuation of the trend for the weakening of the Russian currency.
Even in the event of an end to the conflict, a reduction in government spending on military needs and a partial lifting of sanctions, Europe is unlikely to allow the restoration of the former sales markets for Russian energy resources and Europe's trend towards diversifying supplies is unlikely to change, it remains only to look for new ones. However, Russia has already lost part of the most solvent market.
Strengthening is possible, but this requires a strong position on the part of the Central Bank, which must again raise the interest rate and hold it for a long time, but in the current macroeconomic conditions this looks unlikely, although such a development cannot be ruled out.
Technical picture:
After a false breakdown of the main resistance 79.6 - 86.1, the price returned under it and now it acts as the main reference point for market participants.
In the same area, the previous price pattern passes, which now acts as a resistance line.
Last year, a new price model was formed to reduce the value of the US currency.
Also, we have a dollar support level at 51.4 - 48.7.
Therefore, I recommend to closely monitor the area of the past resistance level, at the moment the picture tells us, at a minimum, about trading in a range and or a possible further strengthening of the ruble.
However, it is the fundamental picture that tells us about
reverse.
In response to the sanctions policy, the ministers limited the capital account, greatly inflated the interest rate and allowed commercial banks to introduce a commission for storing dollars and euros (about 12% per year), without the possibility of withdrawing cash (only in rubles, at the rate of the Central Bank) .
Naturally, a cash currency market appeared, the spread of which at the current price is about 10 rubles.
The high volatility of the national currency and the withdrawal of Western firms hit imports catastrophically, while exports continued to bring in large foreign exchange earnings due to high energy prices.
Thus, we got an artificial strengthening of the ruble, for which we created all the necessary macroeconomic conditions - a huge positive trade balance. The state budget also remained in surplus for a long time.
After the onset of 2023, all past "pros" for the ruble were not viable. The Central Bank lowered the key interest rate to 7.5%, the trade balance has ceased to be published since March 2022. Thus, we observe 2 important factors:
1) The state budget deficit, which in January already received 65% of the entire projected deficit for 2023.
2) QE, which was launched by the Central Bank to finance budget gaps through REPO.
Of course, the government has a special fund to cover the budget deficit, but its liquid part is 6.5 trillion rubles, while the budget deficit, only in January, amounted to 1.76 trillion.
In this case, the government has already begun sequestering the budget, with the exception of military and power items. However, this is not enough in the face of the loss of major sales markets and declining energy prices.
Gas prices in Europe fell below $600, and URALS oil fell below $60, although back in November they were $83.
Under these conditions, the government is left with few options:
1. Significantly reduce military spending and neutralize the budget deficit.
2. Significantly weaken the ruble to restore lost income.
3. Strengthen the hidden QE program.
4. Spend the entire stabilization fund.
I would like the reader to understand that there is a social contract in the Russian Federation - although social security is insignificant, and payments are minimal, they must be carried out impeccably, since violation of this contract entails political risks.
All 4 options, with the exception of the 1st, look the most realistic, with a possible combination. Under these conditions, I do not see other scenarios, except for the continuation of the trend for the weakening of the Russian currency.
Even in the event of an end to the conflict, a reduction in government spending on military needs and a partial lifting of sanctions, Europe is unlikely to allow the restoration of the former sales markets for Russian energy resources and Europe's trend towards diversifying supplies is unlikely to change, it remains only to look for new ones. However, Russia has already lost part of the most solvent market.
Strengthening is possible, but this requires a strong position on the part of the Central Bank, which must again raise the interest rate and hold it for a long time, but in the current macroeconomic conditions this looks unlikely, although such a development cannot be ruled out.
Technical picture:
After a false breakdown of the main resistance 79.6 - 86.1, the price returned under it and now it acts as the main reference point for market participants.
In the same area, the previous price pattern passes, which now acts as a resistance line.
Last year, a new price model was formed to reduce the value of the US currency.
Also, we have a dollar support level at 51.4 - 48.7.
Therefore, I recommend to closely monitor the area of the past resistance level, at the moment the picture tells us, at a minimum, about trading in a range and or a possible further strengthening of the ruble.
However, it is the fundamental picture that tells us about
reverse.