The Central Bank of Russia has raised its key interest rate by 25 basis points to 4.5% in a surprise move. The market consensus was for the bank to hold steady at 4.25%. The surprise hawkish move has added some support to the Ruble, which has now gained 0.29% versus the US Dollar on the day.
In the rate statement issued by the CBR, the bank cited higher inflation expectations as the predominant reason behind the unexpected rate hike. Extra fiscal stimulus, a need to counteract the currency weakening effect of US sanctions and improved economic fundamentals on the domestic front, were also reasons behind the move.
The focus now shifts to the press conference by CBR Governor Elvira Nabiullina.
Presently, the USD/RUB is down 0.3% as the pair responds to the rate decision. However, the active daily candle has found support at the 73.919 support line. The pair needs this level to be broken down for the USD/RUB to aim for lower support targets at 72.802 and possibly 71.981. Attainment of the latter breaks an 8-month old support level for the pair and could lead to a cascade to the downside.
On the other hand, the establishment of a bullish reversal on the pair requires the USD/RUB to take out the 74.520 resistance, as well as the 76.511 level up north to establish a new higher high. This move must also take out intervening resistance levels at 75.487 and 75.974.
