FX market steady amidst uncertainty

FX market steady amidst uncertainty



20 листопада 2014 года
ICU

Political uncertainty loomed yesterday. First, Russia announced that it would end hostilities in eastern Ukraine only if the West agrees to refuse NATO membership to Ukraine. Following this news, the departing minister of finance said that Ukraine must receive additional IMF funds no later than late January, because the new government is not yet in place and no state budget for 2015 has been approved. These developments are grossly negative for macroeconomic and FX outlooks. The Kremlin has no intention of yielding the Western demands to withdraw from Ukraine. Its request to prevent Ukraine from joining NATO is meant to buy them additional time and divert attention away from the ongoing military buildup in Donbass and in Russian borderlands. The need for IMF funding darkens to the macro backdrop as it indicates that the elections in Ukraine resolved very little. A new government was meant to speed rather than dampen decision-making. The lack of politicians' attentiveness to macro issues is also discomforting. While the hryvnia remained unchanged yesterday, its real trade weighted index was up as global macro conditions were less volatile than they have been in the recent past months. A late-day release of the US Fed's minutes from the recent rate-setting meeting jolted the markets as Fed members began serious discussions of rate increases.

Источник: ICU

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