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Russian Ruble Slumps on Weak Data, Geopolitical Risk

July 3, 2019 at 18:01 by Andrew Moran

A heap of 1,000-ruble billsThe Russian ruble is slumping midweek after a few pieces of economic data disappointed investors. This comes one day after the currency endured major swings on reports of a possible military fallout between the US, Russia, and the European Union following several events that appeared to be isolated from one another.

Despite a strong finish to the first quarter, the nation’s manufacturing output has taken a hit. The IHS Markit Russia Manufacturing purchasing managers’ index (PMI) slumped to 48.6 in June, down from 49.8 in May. The market projected the index to clock in at 50.5. This represents the lowest reading in 11 months and the first decline in new business since August 2018. Anything under 50 indicates a contraction.

Meanwhile, the IHS Markit Russia Services PMI fell from 52.0 in May to 49.7 in June. This is the first contraction in services activity in more than three years. The disappointing read was driven by a decrease in new orders and employment sinking at the fastest pace since April 2016.

According to the Federal State Statistics Service, business confidence in June remained the same at -1. It has not been in positive territory since the end of 2012 and beginning of 2013.

On Tuesday, the geopolitical realm was buzzing on huge developments that led to a lot of speculation and theories.

It started when Vice President Mike Pence canceled a planned event in New Hampshire to talk about a drug crisis. He was on board the plane, but he turned around and went back to the White House. Soon after, President Vladimir Putin canceled his scheduled events to meet with the Defense Ministry over a submarine fire that killed 14 sailors. Then, the EU Political & Security Committee convened, which was followed by a joint statement from France, Germany, the United Kingdom, and the European External Action Service. A day later, Putin suspended the nation’s participation in the Intermediate-Range Nuclear Forces (INF) Treaty with the US, effective immediately.

It was unclear if financial markets were paying attention. The Direxion Daily Russia Bear 3X Shares (RUSS) advanced 1.4%, but the MOEX Russian Index ended the session up 0.3%. The ruble plunged against major currencies by as much as 1%.

Last month, the Bank of Russia cut its main interest rate by 25 basis points to 7.25%, signaling that it is ready to make additional cuts.

The USD/RUB rose 0.07% to 63.3561, from an opening of 63.3098, at 17:53 GMT on Wednesday. The EUR/RUB edged up 0.01% to 71.4633, from an opening of 71.4441.

If you have any questions, comments, or opinions regarding the Russian Ruble, feel free to post them using the commentary form below.

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