Ruble’s depreciation, Turkey’s adjustment in swing

The depreciation of the Russian ruble gathered pace this week amid a continued squeeze on Russia's trade surplus and growing capital outflows. A weaker currency will support the fiscal position, but at the same time is likely to add to inflation and supports the case for a large interest rate hike later this month. Elsewhere, trade, inflation and FX reserves data released this week for Turkey revealed the extent of the adjustment in the economy that is now taking place following the recent sharp depreciation of the lira. We think it's plausible that Turkey's current account deficit narrows towards 2% of GDP by year-end.