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GBP to RUB Exchange Rate’s Rebound from Yearly Low Limited by Brexit Fear and Mixed Russian Data

July 17, 2019 - Written by David Woodsmith

Investors bought the British Pound to Russian Ruble (GBP/RUB) exchange rate back slightly from its worst levels today. The Pound’s days of losses finally cooled, and the Russian Ruble was less appealing following the publication of Russia’s latest mixed data. Despite this slight rebound though, the pair remains close to its worst levels in around a year and a half.

Following last week’s tumble from 79.92 to 79.24, GBP/RUS could be in for yet another week of losses unless the pair makes a stronger recovery in the coming sessions.

GBP/RUB currently trends close to the level of 78.10 – just slightly above the yearly low it saw earlier today. GBP/RUB touched on a 2019 low of 77.85 earlier in the day, which was the worst level for the pair since February 2018.

No-deal Brexit fears are dominating Pound exchange rates this week. Compared to the Pound’s movements on Brexit and political speculation, the Russian Ruble’s movement has been fairly low influence.

GBP Exchange Rates Steady after Days of Losses Thanks to Bank of England (BoE) Speculation

Despite a lack of surprising domestic developments this week, the Pound has seen a significant selloff since the beginning of the week that only just slowed today.

Sterling slipped on Monday, then plummeted on Tuesday when investors reacted to comments from Boris Johnson.

As the frontrunner to become Britain’s next Prime Minister within the next few weeks, Johnson’s comments claiming that he would not accept any Brexit deal that included the Irish backstop plan caused no-deal Brexit fears to surge.

The EU has repeatedly indicated that a solution to Ireland’s border issue is essential to a deal, and the backstop is thus far the only solution the EU agrees on.

On top of concerns that a Johnson government would not reach a deal with the EU, speculation that Johnson could end the Parliamentary session in October in order to prevent attempts to block a no-deal Brexit also left Pound investors panicked.

These recent developments have caused markets to price in the chances of a no-deal Brexit higher. According to strategists from Nomura:

‘These are all risks we’ve known about for months, so it’s not new, but there is the need for Sterling vol to actually price these risks, which it simply was not doing much of before this week,’

Yesterday’s UK inflation rate data met expectations.

While the data itself had no notable impact on the Pound, some analysts noted that inflation remained around the Bank of England’s (BoE) targets, meaning that there was little case for a rate cut from the BoE just yet. This helped the Pound to steady.

RUB Exchange Rates Slip on Mixed Russian Data

The Pound to Russian Ruble exchange rate has been driven more by Brexit jitters and the Pound’s strength for most of the week so far, but some notable Russian data published today did give Ruble investors something domestic to digest.

Today saw the publication of Russia’s June job market and retail sales results.

The nation’s unemployment rate unexpectedly improved from 4.5% to 4.4% in June, but wage growth came in at just 2.3% rather than the expected 2.8%.

However, while the wage growth rate was weaker than expected, Russia’s June retail sales figure unexpectedly remained at 1.4% rather than sliding to the forecast 1.0%.

These figures, as well as the recent strength in oil prices and rising Federal Reserve interest rate hike bets, helped the Russian Ruble from avoiding much in the way of losses against Sterling.

GBP/RUB Exchange Rate Forecast: Brexit and UK Politics See Increased Focus

Most of the week’s Pound to Russian Ruble movement so far has been caused by Brexit speculation and UK politics, and that is likely to continue over the next week as well.

Britain’s Conservative Party leadership contest is expected to wrap up next week, which is likely to see Boris Johnson win the contest. Then, the process of him becoming Britain’s next Prime Minister would begin.

Any surprising developments in the contest, or news regarding how Brexit may unfold under a Johnson government, are likely to be the primary focus for Pound investors in the coming sessions.

UK retail sales data from June will be published tomorrow, and while this dataset is typically influential, it may not have much impact on the Bank of England (BoE) speculation or the Pound unless it is particularly surprising.

Failing that, Pound to Russian Ruble exchange rate investors will focus on Brexit and UK politics until next week’s Russian business confidence data and Central Bank of Russia (CBR) policy decision.
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