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Friday, December 2, 2016

Britain supports the ruble and oil stronger


The Russian currency back on the horse thanks to the return of oil above $ 50 a barrel and uncertainty over the most important for Europe solutions UK on continued membership in the EU or out of it. Resonant murder of a British MP and the latest polls make a withdrawal from the EU less likely. What does this mean for oil and the ruble?

The Russian currency at the auction on Monday is trading at a significant advantage after oil, the price of which exceeded $ 50 per barrel of Brent. The dollar broke down the level 64 of the ruble for the first time since June 9. The Euro fell to 72.6 of the ruble.

“Speculative price of oil can still add, but is unlikely to consider an increase above 52-53 per barrel as sustainable”

The dollar weakens, and the ruble and oil prices strengthened due to uncertainty about the outcome of the referendum in Britain on EU membership, which will be held June 23. The question of the plebiscite, which the country has called the most important strategic decision a generation, is: “Should the United Kingdom remain a member of the European Union or leave the European Union?”.

Numerous statements by representatives of the EU and the murder of a British Deputy Joe Cox, supporter of the preservation of Britain’s membership in the EU have reduced the likelihood of Brexit, and investors once again drew attention to the risky assets. “It is assumed that ill was that her death should cause more undecided voters to stay in Europe”, says OLE Hansen from Saxo Bank.

Three of the six published in weekend the British survey highlighted the increasing number of proponents of the EU. It slightly loosened the uncertainty in the markets due to the unpredictability of the consequences of country’s withdrawal from the block and pushed investors to buy depreciating last week of assets because of the threat of Brexit, reports “Reuters”.

According to Bloomberg, currently about 45% of Brits ready to vote to keep EU membership. About 42% against and 13% undecided.

A referendum in the UK and in Europe in General will be the main theme this week. “Because the result is very difficult to predict high volatility on the markets and various asset classes will continue up to vote, and in the case of a decision to withdraw from the EU and after it,” notes Hansen.

Supporters of withdrawal from the EU believe that a likely Brexit will not have a significant negative impact on the state of the economy and the standard of living of the population, as the UK is emerging from the crisis with fewer losses than the rest of Europe. Opponents of Brexit, on the contrary, fear that a British exit from the EU could undermine all the efforts of the Bank of England and the government on a conclusion of economy from crisis and recession after Britain’s withdrawal from the EU will only intensify, says Natalia Milchakova from Alpari.

Meanwhile, stock markets are losing, government bonds now have a negative yield. All this contributes to investments in other assets, particularly gold. The yellow metal jumped the most in almost two years, says Hansen. The demand for risky assets began to rise, including oil. Moreover, the growth of quotations has occurred, despite the fact that the number of drilling rigs in the US increased for the third consecutive week and literally on Friday published statistics on increase of 10 rigs.

According to Hansen, if the UK decides to leave the EU, it will be a long period of uncertainty that could support the dollar, and gold may return to the maximum of 2014 at the level of $ 1,400. If the country remains in the Union, then the dollar is likely to fall.

Another factor that makes the dollar weak against foreign currencies associated with monetary policy of the fed. On Friday, an important official of the Federal reserve, James Bullard suggested that the US economy may need only one rate increase over two and a half years, whereas previously the regulator had planned to two increases in the current year. Therefore, the focus of markets, in addition to the British referendum on 23 June, two-day (21-22 June) the report of the head of the U.S. Federal reserve Janet Yellen before us lawmakers.

“The soft rhetoric of the fed would maintain the asset in its desire to move in the direction of growth. In particular, such a chance will appear in the speech of fed chair Janet Yellen before Congress on Tuesday and Wednesday,” – said in a research report of ROSBANK.

The forecast for oil

Anna Kokoreva of “Alpari” believes that speculators are gaining new positions for oil to go above $ 53 per barrel. “If the quotes will manage to consolidate above this level, the oil may freely rise in price to 62 dollars per barrel”, – the expert believes.

“We stick to the forecast that in the coming months the price of crude oil will fluctuate between 45 and slightly above $ 50 per barrel,” says Hansen.

Valery Polkhovsky from Forex Club says that the August contract will continue fluctuations in the range of 47-55 dollars per barrel. He explains that the reasons for large-scale consolidation is now a little forest fires in Canada began to decline and the company is gradually preparing to return capacity. This can happen by the end of the month. Plus there are attempts to normalize the situation in Nigeria, which also can add to the market supply. Finally, in the United States “kanavice” slowly began to increase drilling.

Brent will be short-term cost 48-52 per barrel, says Denis Davydov from Nordea Bank. “Speculative data on Brexit, oil prices can still add, but still is unlikely to consider an increase above 52-53 per barrel as sustainable,” he concludes.

The growth of oil to support the ruble. In addition, the Russian currency will support local market participants as we approach the peak of the tax payment – June 27 Russian corporate sector continues to prepare for the payment of dividends.

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