The Russian ruble added to its 2023 gains in overnight trading on Thursday amid mixed economic data. Despite the international community applying a plethora of sanctions on Russia, the ruble has remained strong, and this continues so far this year. Is something about to break?
Retail sales plunged 10.5% year-over-year in December, worse than market estimates of -9.5%. This was also down from the 7.9% annualized decline from the previous year.
Business confidence improved in January, rising to 2.7 points for the first time since February 2022. This was way up from -4 in December. This comes as corporate profits increased nearly 9% in November.
On the labor front, the unemployment rate tumbled to 3.7% to finish 2022, much better than economists’ expectations of 4%. Real wage growth also edged up at an annualized rate of 0.3%, topping the market consensus of -1.6%.
This comes after foreign exchange reserves returned to near pre-war levels of $597 billion last month, up from $582 billion in December. Many market experts anticipated that President Vladimir Putin’s war chest would decline sharply to $540 billion.
Many market observers will pay attention to this week’s monetary policy meeting. While experts say the Bank of Russia will leave interest rates on hold at 7.5%, analysts will be paying attention to the post-meeting press conference to determine what the state of monetary policy could be over the next 12 months.
Meanwhile, Moscow received some good news recently when the International Monetary Fund (IMF) forecast that Russia’s economy would outperform the US in the next two years.
In 2023 and 2024, the Russian GDP growth rate will be 0.3% and 2.1%, respectively. By comparison, the US GDP expansion rate in this span will be 1.4% and 1%, respectively.
Like last year, the Russian ruble has held steady in the first month of the trading year. The ruble has gained 1.4% against the greenback.
The USD/RUB currency pair fell 0.74% to 72.7150, from an opening of 73.256, in overnight trading. The EUR/RUB currency pair rose 0.47% to 78.03, from an opening of 77.67.