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Despite the relatively healthy recovery from the first wave of lockdowns and the less stringent restrictions in response to the second wave of COVID-19 in Europe and the US, as well as good news on vaccines, authorities are still contemplating support measures. On the fiscal side, a bipartisan group of US senators has proposed a $908bn spending package to break the deadlock on the fiscal stimulus. On the monetary side, the ECB could extend TLTROs and PEPP until YE21 and expand the latter by a third on 10 December (to EUR 1.8bn, according to Bloomberg Economics).
Finally, the Russia-specific geopolitical risk premium has dropped over the past month from RUB 6 (before the US presidential election) to RUB 2.6 as per our model, as some of the risks that emerged over July-November have been resolved. In addition to that, the CME net non-commercial ruble positioning remains adverse for the currency, which we believe can be attributed in part to the elections in the US. If it returns to its historical averages, we could see a more even upside. Even if oil prices do not cement the optimism of the recent OPEC+ decision, we think there is another 5% upside to the ruble due to the better outlook for Russia for 1Q21. We think the appreciation momentum could see the RUB/$ rate strengthen to 73.2 by YE20 and 71.93 by 1Q21.
94 RUSSIA Country Report January 2021 www.intellinews.com
