Russian Ruble selloff continues as the currency free-falls to new record low

Enrique Díaz-Álvarez16/Dec/2014Currency Updates

GBP

A difficult day for Sterling, which saw most of its gains from last week completely erased against the Dollar in a matter of hours. The UK currency plunged by 0.5% during the course of the day and closed within touching distance of the fourteen month low which was set as markets opened last Monday.

More evidence out on Monday to suggests that the UK housing market has started to slow. House price growth fell to 7% YoY in December according to Rightmove, with prices falling by 3.3% month on month. On a more positive note, factory orders growth hit a five month high. The CBI’s measure for expected output in the next three months rose to +16, while the monthly industrial trends survey climbed to +5, both considerably above forecasts. Output is now expected to continue to grow heading into the New Year, although the otherwise solid outlook for UK manufacturers is very much dependent on the challenges faced in the global economic backdrop, principally in Europe.

A very busy morning for the UK economy this morning will likely lead to a great deal of market volatility. At 9am this morning the central bank Governor Carney spoke at an Inspiring Women event, while at 9:30am this morning National Statistics will be releasing a string of data including the UK inflation figures for November.

EUR

The loss of Sterling strength during the day was good news for the single currency which was able to climb 0.6% and touch its strongest position versus the Pound in all of December.

No major releases or announcements in the Eurozone yesterday. The main focus of attention in European markets is still the ECB and its impending decision on quantitative easing measures. According to a monthly Bloomberg survey, more than 90% of economists now expect the central bank to begin large scale buying of government bonds in 2015, up significantly from the 57% from the same survey last month.

The big announcements in the Eurozone will again be coming out of Germany with the ZEW surveys on Economic Sentiment and Business Conditions at 10am GMT.

USD

The greenback appreciated slightly against its major peers on Monday, finishing the day in a position of relative strength, 0.1% up despite a late dip.

Production increases across the board, notably gains in manufacturing and utilities, combined to boost the Federal Reserve’s measure of Industrial Production by 1.3% month on month, well up on the 0.7% that was forecast and a significant improvement on the weak 0.1% gain in October. US manufacturing surged upwards in November by 1.1%, its largest increase in nine months aided by rising motor vehicle output which drove the big gain for manufacturers with production jumping by 5.1%. Encouragingly, capital utilisation, a measure of the percentage of capacity being used in US production, shot upwards to 80.1%, its highest point since before the global financial crisis in March 2008.

A relatively quiet day today in the lead up to the Federal Reserve’s interest rate decision and monetary policy statement on Wednesday evening with main announcement being the Manufacturing PMI for December from Markit at 2:45pm.

Rest of the world

Despite the low voter turnout on Sunday, Japanese Prime Minister Shinzo Abe won a landslide victory in the parliamentary election. On the back of this the recently struggling currency was able to climb yesterday, with the Yen appreciating by 0.6% on the Dollar. Finally, Monday was yet another disastrous day for the Russian Ruble which fell by a staggering 8% amid the country’s economic woes caused by tumbling oil prices.

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Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.