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Russian Ruble Gains on Calls for G7 Reinstatement

August 22, 2019 at 12:15 by Andrew Moran

Russian 5,000-ruble banknotesThe Russian ruble is gaining on Thursday after renewed calls to reinstate Moscow into the G7. After being ousted from the group of eight economies over the annexation of Crimea in 2014, Russia might return to the table and engage with other economic powerhouses. Data is also lifting the ruble toward the end of the trading week.

On Wednesday, meeting with Romanian President Klaus Iohannis, President Donald Trump reiterated past support for allowing Russia back into the G7. He thinks it would be “much more appropriate” to have President Vladimir Putin return to the negotiating table, instead of ostracized from the international community.

He also believes that Putin “outsmarted” his predecessor, former President Barack Obama.

Trump uttered similar comments in the past, proposing to reverse the G7’s decision five years ago:

Whether you like it or not, and it may not be politically correct, but we have a world to run. And in the G-7, which used be the G-8, they threw Russia out. They should let Russia come back in because we should have Russia at the negotiating table.

President Trump is scheduled to travel to France this week for the annual G7 meeting. He will likely discuss the issue as he sits down with his counterparts from Great Britain, Canada, France, Germany, Italy, and Japan.

On the data front, the Russian economy received some encouraging signs the country could avert a recession.

According to the Federal State Statistics Service, the gross domestic product expanded 1.7% in July 2019 from the same time a year ago, up from 0.8% in June. The economy got a boost from agriculture and construction. But retail sales rose just 1% last month, down from 1.4% in June, though retail trade climbed 2.3%.

The unemployment rate ticked up 0.1% to 4.5% last month, but year-on-year real wage growth surged 3.5%, beating market forecasts of 2.3%.

Are these numbers enough to stave off a recession? Economists have dampened their outlook for the Russian economy, predicting a technical recession as early as this year.

The Stolypin Growth Economic Institute wrote in a research note:

Considering the current economic policy (tight fiscal policy and stringent monetary policy) and a weak effect of National Projects, a technical recession may be seen in the economy as early as in 2019, instead of 2021 projected by the Economic Development Ministry.

The USD/RUB tumbled 0.29% to 65.5964, from an opening of 65.7848, at 12:06 GMT on Thursday. The EUR/RUB fell 0.32% to 72.6954, from an opening of 72.9306.

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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