Financial dances around Alaska: scenarios for the impact of Putin and Trump talks on the economy have been named

It is clear that the key topic of the negotiations between Putin and Trump this time will obviously be the settlement of the conflict in Ukraine. But the parties will also discuss economic cooperation and arms control. The negotiations will be held in a "five to five" format: five officials from each side will participate in the discussions. Russia will be represented at the meeting by the Presidential Aide Yuri Ushakov, Foreign Minister Sergei Lavrov, Defense Minister Andrei Belousov, Finance Minister Anton Siluanov and the President's Special Representative for Investment and Economic Cooperation with Foreign Countries Kirill Dmitriev. The participation of a representative of the government's financial bloc and Kirill Dmitriev, who is the head of the Russian Direct Investment Fund (RDIF), also indicates a large layer of economic problems that both parties want to discuss.

"The meeting between Putin and Trump in Alaska will be a test for global markets," says Pavel Sevostyanov, Acting State Counselor of the Russian Federation and Associate Professor of the Department of Political Analysis and Socio-Psychological Processes at the Plekhanov Russian University of Economics. "If the parties demonstrate their readiness to gradually normalize relations, the ruble may strengthen by 1-2%, while the dollar and euro may fall slightly. The yuan will remain stable: China is watching closely, but is not giving a direct reaction. Possible agreements on energy cooperation may push oil up by $2-3 per barrel, which will provide additional budget revenue. Gold, on the contrary, may become slightly cheaper - with a decrease in geopolitical tension, investors are moving away from the "safe haven". If the ice in Alaska breaks, the entire world economy will feel the shift." For Russia, this is an opportunity to ease the pressure of sanctions and revive the influx of investment. For citizens, the effect will not be as fast and will begin with a reduction in prices for imported products, the scientist claims.

However, when analyzing in detail how exactly the situation with exchange rates, the price of oil and the cost of gold would develop, financial experts were more skeptical and called for a cautious assessment of the possible results of the negotiations in Alaska.

What will happen to the ruble exchange rate?

Natalia Milchakova, leading analyst at Freedom Finance Global:

"Most likely, we should not expect any major breakthroughs from this meeting in the Ukrainian issue, but at the same time, the meeting may lay the foundation for further negotiations - trilateral or even with the participation of Europe or third countries, for example, Turkey, which initially did not rule out its mediation in the ceasefire negotiations. Also, it is possible that some sanctions will be lifted as a result of it, although, again, we should not expect a major breakthrough in lifting sanctions. Our baseline scenario assumes that the dollar, euro and yuan against the ruble will remain at today's levels on Monday, in the corridors of 79-81, 92-94 and 11-11.3, respectively.

However, if we assume that the meeting will be a breakthrough, and real steps will be taken to resolve the territorial issue, and to a temporary or even long-term ceasefire in Ukraine, as well as to lift sanctions against the largest Russian companies and banks, and to restore direct flights between Russia and the United States, then the dollar may fall to 77-78 rubles, the euro to 90-91 rubles, and the yuan to 10.9-11 rubles. And the further the peace process and the process of lifting sanctions progress, the stronger the ruble will be.

There is also an unlikely negative scenario, which assumes that the negotiations between the two presidents will fail, say, due to some external provocation, in Ukraine or somewhere else, and the unpredictable President Trump can theoretically blame Russia for everything and introduce new sanctions against the Russian economy, as well as sanctions against importers of Russian oil. In this case, the dollar can quickly rise to 84 rubles, the euro to 97 rubles, the yuan to 11.7 rubles, and, most likely, these levels will not be the upper limit: the ruble can continue to fall. Overall, we estimate the probability of the baseline scenario at 65%, the optimistic one at 30%, and the negative one at only 5%.

Natalia Pyryeva, leading analyst at Tsifra Broker:

“Volatility on the currency market may increase in the near future amid negotiations, and the range of fluctuations of the ruble may expand to 75-85 rubles per US dollar, the yuan exchange rate will trade in the range of 11.3-11.7 rubles, the euro - 92.8-97 rubles.

We do not expect any changes in the situation for the ruble here and now - the accounts will not be unblocked, the sanctions will not be lifted. In the most favorable scenario, the risk in relation to Russian assets will be reduced, which will be able to attract non-residents, as was the case at the beginning of the year at the stage of the beginning of the negotiation process after Trump took office.

We traditionally believe that physically buying currency to make money is not the most reliable strategy, since exchange rates involve spreads (the difference between the buying and selling rates), banks may have limited cash liquidity, which will negatively affect the terms offered for buying or selling currency.

We traditionally adhere to the principle of distributing savings in several currencies (whether dollars, euros or yuan) and buying currency during periods of ruble strengthening. Thus, in the long term, current levels look attractive for buying currency. At the same time, we are extremely skeptical about the intention of speculative earnings on the currency market, if you are not a professional participant in it."

Oil awaits breakthrough

Mikhail Vasiliev, chief analyst of Sovcombank:

"In the baseline scenario (with a probability of 60%), we believe that the results of the negotiations will not affect the supply of Russian oil to the world market, and therefore, oil prices. We expect Brent oil prices to remain in the range of $63-69 per barrel in the coming weeks.

In an optimistic scenario (with a probability of 30%), progress in the negotiations could lead to expectations of an increase in the supply of Russian oil on the world market, and this will lead to a moderate decrease in Brent oil prices to the region of $60-65 per barrel.

In a pessimistic scenario (with a probability of 10%), the lack of progress in the negotiations could lead to expectations of new sanctions on Russian oil exports. As a result, Brent oil prices could rise to $67-72 per barrel."

Natalia Milchakova:

"We do not believe that the negotiations can have a significant impact on the price of oil. There will be no trading in oil over the weekend, and on Monday, its quotes may already be determined by completely different factors. In the medium term, if, for example, Trump begins to gradually lift sanctions against Russian oil companies, oil may begin to get cheaper and fall to $60-62 per barrel. But if new sanctions are introduced, "black gold" will rise in price, including to $70-72 per barrel. But, most likely, quotes will remain at the current levels of $65-68 per barrel."

Gold and Alaska

Alexey Vyazovsky, Vice President of the company "Golden Plata":

"The main factor determining the price of gold is not the negotiations on Ukraine in Alaska, but the expectations of the actions of the US Federal Reserve System (FRS). At the September meeting of the American regulator, rates will be lowered. Futures are now indicating this, and they are an important reference point for investors. The probability of this event is now 84%, against - only 16%. At the same time, gold has an inverse correlation with the cost of capital: the lower the FRS rates and the greater the expectations that they will fall further, the higher the cost of gold.

Now it is trading at a mark slightly below $3400 per troy ounce. In the long term, the market is in an upward trend. Gold prices have already set historical records several times over the past three years. Geopolitics affects the price of the precious metal, but more in the moment. The price of gold can set new records if some global truce does not happen, and it can jump up if the escalation continues not between Russia and Ukraine, but between Russia and the United States. I am now referring to the movements of nuclear submarines that Donald Trump announced. If something similar is announced again, or the negotiations completely fail, I do not rule out a very quick breakthrough of the $3500 per troy ounce level. Over the past few months, the price has already hit this level several times. After breaking this level, it opens the way to $3650-3700 per ounce, which, in a negative scenario, the price of the precious metal can slip through in a few days.

Based on these expectations, investors who believe that Russia and the US will not be able to reach an agreement and that the overall geopolitical situation will only worsen have already begun to gradually buy up the precious metal. Those of them who are counting on a peaceful outcome, on certain agreements and some level of truce acceptable to both sides being reached, are confident that the price of gold will adjust to $3,300 per ounce. Thus, the geopolitical risk premium will disappear from the price, and then it will be possible to start buying this asset. This group of investors has now adopted a wait-and-see attitude.

Accordingly, the price corridor looks like this: if good agreements are reached, a decrease to $3,300 per ounce or a quick move above $3,500 in the event of a sharp negative outcome of the negotiations in Alaska. The main drivers of growth of the precious metal are as follows. The first of them is the policy of the Federal Reserve. This includes not only the reduction of rates. In second place is the loss of independence of this structure, since, as can be seen from the news, Trump is putting pressure on the head of the Federal Reserve Jerome Powell and wants to replace him with another figure who is more loyal to the US President. And although the contract of the head of the Federal Reserve expires next year anyway, it is obvious that the role of institutionalists in the American leadership is increasing. Geopolitics with all its scenarios in the price of gold occupies only third place."

Natalia Milchakova:

"Gold quotes are slightly rising today amid a weakening dollar. If the dollar continues to decline against world reserve currencies after the talks, gold may return above $3,400-3,450 per troy ounce. If the dollar goes up, gold may remain at current levels, below $3,400. Gold is not as sensitive to political news as the stock or currency market."

The Russian Economy and the Pockets of Citizens

Natalia Milchakova:

"The results of the negotiations may have an immediate impact on Monday only on the ruble and the stock market. The real sector of the economy may be affected either by the subsequent easing of sanctions or, conversely, by new sanctions.

Ordinary citizens may feel the results of these negotiations in the form of, for example, a decrease or increase in inflation, a strengthening or weakening of the ruble, as well as in the form of decisions by the Central Bank of the Russian Federation on the key rate. If events develop according to a moderate or optimistic scenario, then the reduction of the key rate will continue. If the negative scenario works out, then the regulator may take a long pause in reducing the rate."

Mikhail Vasiliev:

"In the baseline scenario (with a probability of 60%), we do not expect quick results from these negotiations, so we do not predict significant changes for ordinary citizens either. We allow for some gradual normalization of relations between Russia and the United States.

We believe that direct flights between the countries may resume in the future. In an optimistic scenario (with a probability of 30%), progress in the negotiations may lead to a strengthening of the ruble, a gradual easing of sanctions, a reduction in import costs, a faster reduction in inflation and a faster reduction in the key rate. Loans will become cheaper, and deposit rates will also decrease.

We have modeled what could happen in the most optimistic scenario of the settlement of the Ukrainian conflict and the complete lifting of sanctions. In this scenario, due to the improvement of foreign trade conditions and the inflow of capital, the dollar may for some time move into the range of 60-70 rubles per dollar (at the moment it may be 50-60 rubles per dollar), until the authorities take measures to contain the strengthening of the ruble. The stronger the ruble, the lower the inflation and the key rate will be, all other things being equal. In this optimistic scenario, due to the strengthening of the ruble and the lifting of sanctions, inflation may slow down by the end of the year to around 4%, and the Central Bank may reduce the rate by the end of the year to 9-10%. In the baseline scenario (with unchanged geopolitics), we expect inflation to decrease by the end of the year to 5.6% and the key rate to decrease to 14%.