Russia FX/Rates Snapshot - February 5, 2020

Although further signs of progress are likely to be seen in the upcoming days, in order for markets to recover the measures that are constraining economic activity would need to be removed - for example, major businesses would need to reopen, the quarantine lifted and air service restored between China and other countries. However, given that the number of infected people is still high in absolute terms, it is unlikely that this will happen anytime soon. Therefore, we see a strong possibility that risk assets will correct after yesterday's gains and that the ruble will drift back to the 63.4 area. In terms of key events, investors will be watching out for the ADP employment numbers for January. Also, Russia's Finance Ministry will announce the volume of FX purchases in February, which we expect to be almost twofold lower m-o-m at R170 bln. This should be supportive for the ruble later in the month.