18.05.2022

In the medium term, the euro has every chance of taking a course towards strengthening

The dynamics of the EURRUB pair turned out to be stronger (68.3, -0.4%) due to the weakening of the European currency (EURUSD 1.18, -0.2%) against the background of persisting political risks.

However, SG analysts note that the euro remains undervalued amid the accelerating growth of the eurozone economy and plans to normalize the ECB’s policy.

In their opinion, in the medium term, the European currency has every chance to take a course towards strengthening and reach the level of $ 1.30 on the horizon of 18 months.

Money market

By the end of the week, the volume of free liquidity in bank accounts with the Central Bank stabilized at 3.4 trillion rubles, which is slightly less than the level at the beginning of the week. Nevertheless, yesterday’s transfer of funds from correspondent accounts (1.87 trillion rubles, -0.5 trillion rubles) to deposit accounts as part of the next deposit auction “fine tuning” for the period from 12 to 16 October, is of interest. Formally, the funds to be turned over can be postponed until the forthcoming payment of insurance premiums (approx. 470 billion rubles, October 16).

In this sequence of operations, the question about the strategy of the Bank of Russia in absorbing free ruble liquidity remains unanswered: for the third week in a row, weekly auctions do not find a full offer, and only the “transition” through the weekend is of interest to banks. Under these conditions, money market rates do not appear to be firmly anchored (Ruonia overnight again dipped below 8.0% in the middle of the week).

We believe that such a discrepancy will be leveled out rather quickly by the budget factor: in October and November, historically, the budget forms a liquidity deficit. However, from the beginning of next year, more intensive COBR placements are likely to be required.

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