Weekly FX Outlook: December 19, 2014

USD/JPY
Throughout the week, the pair have failed to make a sustained break above the 119.00 level, as negative sentiment in Russia, political instability in Greece combined with the continued slide in oil prices induced an influx of safe haven flows into JPY as the pair reached November 17th lows of 115.57. However, focus this week has been on the FOMC rate announcement which although was slightly more dovish than expected the Fed not removing the ‘considerable time’ phrase as some had anticipated, with the end-2015 rate outlook falling which saw the S&P 500 rise the most in almost 2 years. The strength in equities led to USD strength, with the momentum to the upside spurred by the a recovery from the recent lows, which subsequently saw USD/JPY briefly reclaim the 119.00 handle before fading late into the session. In other news the BoJ rate decision failed to provide the market with any surprises as they left rates unchanged, although the BoJ raised their assessment on output and exports providing the Japanese economy with some respite heading into the festive period. Looking ahead, Tuesday provides participants with a flurry of US tier 1 data announcements with Durable Goods Orders, GDP, Univ. Michigan Confidence, New Home Sales, PCE Core and API Crude Oil Inventories. Moreover, Japanese markets are open on Christmas Day with inflation data, Industrial Production, comments from BoJ’s Governor Kuroda as well as the BoJ minutes on Christmas Eve.

USD/RUB
The pair has been a key source of focus throughout the week after the surprise decision by the Russian central bank to hike their key interest rate by 650bps to 17.00%. Despite the aggressive hike and in a somewhat counter-intuitive move, the pair actually rose higher as concerns over the fragility of the Russia economy guided investor sentiment. The move saw the pair print a weekly high just north of the 79.00 handle despite the best efforts of the Russian central bank who also sold USD in an attempt to stabilise the currency. That said, in the latter half of the week, as some of the initial fears regarding the Russian economy began to subside, the RUB eventually began to stabilise and broke back below 60.00. Looking ahead, participants will be looking out for any further indications of action either the Russian central bank or government could take in order to get the Russian economy back on track. However, one risk for the RUB still very much remains in the form of any potential western sanctions.