The fall of US stock indices and the ongoing concerns about the escalation of the US-China trade conflict are putting the Russian ruble under pressure. Moreover, Brent crude oil is in no hurry to continue the rally and is trading near the psychologically important mark of $30 per barrel amid fears of the possibility of a second wave of the pandemic. The tax period which starts in a few days and the increase in foreign currency sales by the Ministry of Finance to $154 million per day as part of the implementation of the budgetary rule are unlikely to support the Russian ruble. The USD/RUB pair is more dependent on the external background than on internal factors.

Despite the stability of the ruble, it must be understood that the pandemic is a more serious challenge for developing countries than for developed ones. The latter have the ability to increase debt in national currencies. Iin addition, their rates are extremely low, and often negative, as in the eurozone and Japan. Emerging markets do not have such preferences. They cannot afford to launch the QE programme and rely only on lowering their interest rates and funds. At the same time, developing countries are highly dependent on China, the largest consumer of raw materials. In this regard, the possibility of another trade war between Washington and Beijing concerns sellers of the USD/RUB.

According to the trade agreement signed in January in the framework of phase 1, China commits to increase purchases of American agricultural products by $80 billion over two years, including by $36.5 billion in 2020. In fact, the parties were talking about $3 billion in the January-March period. The main negotiators such as Chinese Deputy Prime Minister Liu He, US Trade Representative Robert Lightheiser, and US Treasury Secretary Steve Mnuchin are confident that the obligations will be fulfilled by the end of the year. However, if something goes wrong, the White House will increase tariffs, and the renminbi will fall. Apart from that, it will cause an increase in the spread of volatility in currencies of emerging markets. This is the last thing Russia and other countries need at the moment.

Volatility of emerging market currencies

Bad news for the ruble comes from the US stock market. The S&P 500 bulls finally realized that they were too presumptuous about the V-shaped recovery of the US economy. The euphoria gradually passes, as does the desire to buy what is cheap. Profit-taking on long positions is fraught with a continued fall in stock indices, a deterioration in global risk appetite, and an increase in demand for safe haven assets, primarily the US dollar.

Let us not forget that the beginnings of the constitutional crisis in the EU, the inability of finance ministers of the eurozone countries to agree on a fiscal stimulus, and unresolved issues on Brexit burden the economy of the key trading partner of Russia - the European Union. Its problems, continuing geopolitical risks, the weakness of the Russian economy and sells-off on the US stock market create the prerequisites for buying the USD/RUB pair on a breakthrough at the upper border of the triangle near 74.9 and the pivot level of 75.5.

USD/RUB, daily chart