USD/RUB bounces off seven-year low towards 53.00 ahead of Fed’s preferred inflation gauge

• USD/RUB licks its wounds around multi-year low amid sluggish session.
• Ukraine hints at no end to Russian grain blockade, Fed’s Powell repeats latest hawkish comments.
• Fears of recession underpin risk-off mood but rebound in Treasury yields probe USD bulls ahead of the key data.

USD/RUB picks up bids to refresh intraday high around 52.82, after falling to the lowest levels since May 2015 the previous day. That said, the Russian ruble (RUB) pair’s latest rebound could be linked to the market’s anxiety before the key inflation number from the US.

On Tuesday, the major central bankers’ readiness to battle inflation, even at the cost of short-term economic slowdown, recently exerts downside pressure on the market sentiment.

Among them, Fed Chairman Jerome Powell repeated his latest pledge to battle inflation with readiness to announce another 0.75% rate hike if needed. The Fed Boss also praised the US economic strength and helped the US dollar to remain firmer. It’s worth noting that Powell’s comments suggesting challenges for US jobs data during the battle with inflation appears to have weighed on the risk profile of late.

ECB President Christine Lagarde, on the other hand, signaled chances of a heavier rate increase in September while also expecting positive growth rates. Further, BOE Governor Andrew Bailey raised concerns about real income shock.

At home, “A deal to end Russia’s blockade of Ukrainian seaports and grain exports remains distant because Moscow is using talks to push its war aims and ambition to dominate the Black Sea, Kyiv’s top negotiator said,” per the Financial Times (FT).

It’s worth noting that the US 10-year Treasury yields snap a two-day downtrend as the key bond coupons rebound from the weekly low to 3.10%, up one basis point (bp). The same seems to probe the US dollar buyers as the US Dollar Index (DXY) retreats from a two-week high to 105.00.

Even so, fears that central bankers are firm in their determination to battle the inflation woes, even at the cost of short-term economic slowdown, seem to weigh on the risk appetite and drown the S&P 500 Futures, down 0.30% to 3,825 at the latest.

Given the scheduled release of the Fed’s preferred inflation gauge for May, namely the Core Personal Consumption Expenditure (PCE) Price Index, expected 0.4% MoM versus 0.3% prior, nothing matters more than the data. However, Russia's ruble-for-oil strategy and the latest jump in energy prices appear to weigh on the USD/RUB prices.

Technical analysis

USD/RUB remains bearish unless crossing the weekly resistance line near 54.00.