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The EU is set to impose sanctions against Russia for the imprisoning of opposition leader Navalny, Reuters and Bloomberg reported citing diplomats familiar with the matter. Once sanctions are announced USD/RUB should test 72.78 and EUR/RUB should be front heavy as well amid the prospect of higher interest rates, Piotr Matys, Senior Emerging Markets FX Strategist at Rabobank, reports.

Key quotes

“Once sanctions are announced and assuming that those measures are unlikely to cause damage to the Russian economy, USD/RUB and EUR/RUB should start leaning lower again.”

“Given that the CBR is likely to start raising interest rates gradually well ahead of the Fed and the ECB, the interest rate differentials will start widening in favour of the ruble. This in turn should generate sufficient downside pressure on USD/RUB and EUR/RUB to eventually break below 72.78 and 88.80/88.00 respectively.”


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