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A Reuters poll of 15 analysts projects the Russian rouble will trade at approximately 88.3 to the U.S. dollar within the next 12 months. This forecast suggests a 14% decline from its current value but marks an 8.7% upward revision from last month’s predictions.

The rouble has already gained 3.5% since the beginning of the year, following a surprising 45% rally in 2025. While a stronger currency helps the central bank manage inflation, it also puts pressure on state budget revenues and exporters.

Geopolitics and Gold Bolster Rouble Outlook

Changing market dynamics have prompted some analysts to revise their forecasts significantly. Sberbank, for instance, has adjusted its projection from 100 roubles per dollar to 90. The bank attributes this shift to a rally in gold and other metals, as well as evolving geopolitical factors that could support the currency throughout the year.

"Negotiations between Russia, the United States, and Ukraine may extend throughout the year, which could support demand for rouble-denominated assets," Sberbank analysts noted in a report.

Negotiators from Ukraine and Russia met in Abu Dhabi last weekend to discuss territorial issues and are expected to resume talks on Sunday. Moscow's core demand remains that Kyiv cedes the entire Donbas industrial region.

Fundamental Drivers and Economic Support

Beyond geopolitics, several core economic factors are underpinning the rouble's stability. Mikhail Vasilyev of Sovkombank highlighted a combination of drivers supporting the currency:

• A consistent trade surplus

• Subdued demand for imports

• The high key interest rate set by the central bank

• Sales of yuan from state reserves under budget rules

• General optimism for an improving geopolitical situation

Economic Growth, Inflation, and Rate Cut Path

Looking at the broader economy, analysts have slightly downgraded their forecast for Russia's GDP growth in 2026 to a median of 1%, down from 1.1% in the previous month's estimate. Concurrently, the 2026 inflation forecast has been revised upward from 5.2% to 5.3%.

These figures are influencing expectations for monetary policy. Analysts now anticipate a more conservative approach from the central bank, forecasting a half-percentage-point cut in the key interest rate to 15.5% in the first quarter of 2026. This is a more cautious view than last month's expectation of a cut to 15%.

The central bank has two rate-setting meetings scheduled for the first quarter. Following a recent spike in inflation, analysts expect policymakers to hold the rate steady at the first meeting on February 13.

"Macroeconomic data so far does not provide a clear indication that the Bank of Russia is ready to cut the key rate," said Nikolai Dudchenko, an analyst at Finam brokerage.

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Venezuela's interim President Delcy Rodriguez has signed a landmark reform bill designed to open the nation's state-run oil sector to private investment. The move fulfills a major demand from the United States and marks a significant shift in the country's economic policy.

The bill was signed into law on Thursday, just hours after being passed by the National Assembly, which is dominated by Rodriguez's United Socialist Party. During a signing ceremony with state oil workers, Rodriguez framed the reform as a crucial step toward a better economic future.

"We're talking about the future," she said. "We are talking about the country that we are going to give to our children."

Interim President Delcy Rodriguez at the signing ceremony for the oil sector reform bill.

This legislative action follows intense pressure from the Trump administration, which began after the US military's abduction of former leader Nicolas Maduro and his wife on January 3. President Trump had explicitly warned Rodriguez that she could "pay a very big price, probably bigger than Maduro" for failing to comply with his demands to open the oil sector.

Key Changes in Venezuela's Oil Law

The new legislation introduces several fundamental changes aimed at attracting foreign companies, many of which have been wary of investing in Venezuela. The core components of the bill include:

• Private Sector Control: The law gives private firms control over the sale and production of Venezuelan oil.

• External Dispute Resolution: It mandates that legal disputes be resolved in courts outside of Venezuela, addressing a long-standing concern from foreign companies about the domestic judicial system.

• Royalty Cap: Government-collected royalties on oil activities will be capped at 30 percent.

These reforms are designed to create a more appealing environment for outside petroleum firms, who have been hesitant to invest due to the country's history of political instability and economic turmoil under Maduro.

US Loosens Sanctions in Response

Coinciding with Rodriguez signing the bill, the Trump administration announced it would ease some of the sweeping sanctions imposed on Venezuela's oil industry in 2019.

The U.S. Department of the Treasury stated it would now permit limited transactions involving the Venezuelan government and its state oil company, PDVSA. These transactions are specified as those "necessary to the lifting, exportation, reexportation, sale, resale, supply, storage, marketing, purchase, delivery, or transportation of Venezuelan-origin oil" by established U.S. entities.

A Controversial Path to Reform

The policy shift comes after a period of intense U.S. intervention. The abduction of former president Nicolas Maduro, who is now awaiting trial in a New York prison, resulted in dozens of deaths and drew accusations that the U.S. had violated Venezuelan sovereignty.

Trump administration officials have asserted that the U.S. will now determine who can purchase Venezuelan oil and under what terms. The proceeds from these sales are slated to be deposited into a bank account controlled by the United States. This approach has been criticized, though President Trump and his allies have previously claimed that Venezuelan oil should "belong" to the U.S.

This new era of privatization reverses decades of state control. Venezuela first nationalized its oil sector in the 1970s. In 2007, Maduro's predecessor, Hugo Chavez, further tightened government control by expropriating foreign-held assets, setting the stage for years of confrontation with international oil companies.

Canadian Prime Minister Mark Carney is championing a series of new trade agreements, signaling a strategic push to diversify Ottawa's global partnerships while asserting his country's sovereignty in the face of pressure from the United States.

During a meeting with provincial and territorial leaders on Thursday, Carney celebrated the successful negotiation of 12 new economic and security accords over the past six months. "Our country is more united, ambitious and determined than it has been in decades, and it's incumbent on all of us to seize this moment, build big things together," he stated.

This drive for diversification comes amid persistent friction with the administration of US President Donald Trump, who has previously antagonized Ottawa with rhetoric suggesting Canada could become a "51st state."

Forging New Economic Alliances

A central element of Canada's new strategy is a recent agreement with China aimed at lowering trade levies. The deal immediately drew a sharp rebuke from President Trump, who threatened to impose a 100 percent tariff on Canada, accusing the country of acting as a "drop-off port" for Chinese goods.

Carney has clarified that Ottawa is not pursuing a full free-trade agreement with Beijing. Instead, he highlighted the targeted benefits for Canada's agricultural sector. "Part of that agreement unlocks more than $7bn in export markets for Canadian farmers, ranchers, fish harvesters and workers across our country," Carney explained.

Looking ahead, the Prime Minister announced that his government would pursue deeper trading relationships with other major economic players, including:

• India

• The Association of Southeast Asian Nations (ASEAN)

• The South American trade bloc Mercosur

At the same time, Carney affirmed Ottawa's commitment to its primary economic partner, noting plans to "renew our most important economic and security relationship with the United States through the joint review of the Canada-United States-Mexico agreement later this year." The regional trade pact is set to expire in July.

Navigating a 'Great Power Rivalry'

Carney's push for new trade partners follows an attention-grabbing speech he delivered at the World Economic Forum in Davos, Switzerland, just eight days earlier. In his address, he argued that the "rules-based" international order was a fading fiction, giving way to an "era of great power rivalry" where might makes right.

"We knew the story of the international rules-based order was partially false, that the strongest would exempt themselves when convenient, that trade rules were enforced asymmetrically," Carney told the Davos audience. "We knew that international law applied with varying rigour depending on the identity of the accused or the victim."

His speech, widely interpreted as a rebuke of the Trump administration's aggressive tariff campaigns, concluded with a call for the world's "middle powers" to band together in these uncertain times.

Direct Friction with the Trump Administration

The geopolitical backdrop includes a series of aggressive moves by President Trump. His administration abducted Venezuelan leader Nicolas Maduro in what critics called a violation of international law and has made threatening statements toward Greenland, a self-governing Danish territory. These actions have caused unease within the NATO alliance.

Trump has also repeatedly targeted Canada, referring to the country as a "state" and its prime minister as a "governor." Following Carney's Davos speech, Trump withdrew an invitation for the Canadian leader to join his "Board of Peace."

Carney has stood by his remarks, publicly refuting claims by US Treasury Secretary Scott Bessent that he had "aggressively" walked back his position in a private call with Trump.

Carney Demands Respect for Canadian Sovereignty

The tensions came to a head on Thursday when Carney was asked about reports that US officials had met with separatists from Alberta. The Financial Times reported that State Department officials held three meetings with the Alberta Prosperity Project, a group advocating for a referendum on the oil-rich province's independence from Canada.

Carney's response was direct and unambiguous.

"We expect the US administration to respect Canadian sovereignty," he said. "I'm always clear in my conversations with President Trump to that effect."

Prime Minister Sanae Takaichi's new fiscal agenda, featuring increased spending and tax cuts, has sent a jolt through Japan's bond market. Investors are growing concerned that the nation's already massive government debt is set to expand, pushing the 10-year Japanese Government Bond (JGB) yield up 26 basis points to 2.33% this year as of January 20.

The Rising Cost of Japan's Debt

For years, the Japanese government enjoyed the benefits of extremely low interest rates, which averaged around 0.33% between 2016 and 2025. With the 10-year JGB yield now trading above 2.2%, the cost of servicing Japan’s JPY 1,287 trillion in outstanding debt is poised to climb sharply as it gets refinanced over the next decade.

A sensitivity analysis reveals just how severe the budget pressure could become:

• Surging Interest Payments: If JGBs are refinanced at an average rate of 2.0% to 2.5%, Japan's interest servicing costs could balloon from the current 9% of total government expenditure to between 20% and 25%.

• Total Debt Service: This would push the total debt service expense to an estimated 35% to 40% of all government spending.

This forecast assumes revenue grows at 3% (factoring in 1% GDP growth and 2% inflation) and non-debt spending also increases by 3%. For perspective, an interest burden of 20%-25% is exceptionally high for an investment-grade OECD member. The last peak for OECD nations was 11.3% in 1988, a period of high inflation that preceded a global recession.

To keep debt service at its current 25% level, the government would need to find significant new revenue streams to limit new bond issuance. Prime Minister Takaichi has indicated a desire to keep the debt-to-expenditure ratio stable, which implies a focus on raising revenue.

Spillover Effects: From Bonds to Stocks and the Yen

The pressure in the JGB market is already spilling over into Japanese equities. The Morningstar Japan TME Index, which gained 7.9% through January 14, has since pulled back by 3.6%. These bond market jitters, combined with recent discussions about potential intervention to support the yen, have weighed on stocks.

Historically, Japanese equities have had an inverse relationship with the yen, primarily due to the impact of currency conversion on earnings from exports and overseas operations. However, this is seen as a neutral factor for shareholders.

The yen is expected to hover around the JPY 150 level. Over the long term, the narrowing gap between U.S. Treasury and JGB yields should offer the currency some support. U.S. 10-year Treasuries are forecast to yield around 3.3% by 2028 as American monetary policy normalizes. Despite this, the yen could still face near-term pressure from risk aversion tied to Japan's debt concerns.

The primary risk remains the high cost of debt, along with the possibility that financial institutions could be asked to help stabilize the market by purchasing government bonds. While this may not directly impact the earnings of banks and insurers, it could be viewed as an unpopular short-term use of their capital.

Policy Crossroads: Elections and Central Bank Moves

After the initial spike, the JGB market has stabilized slightly following government assurances and hints of support from the Bank of Japan (BoJ). While direct intervention from the BoJ to calm the bond market would not be surprising, such a move would also fuel inflation risks. The central bank is already expected to raise its policy rates from the current 0.75% to a range of 1.25%-1.50% by 2028.

Politics adds another layer of complexity. With a snap election scheduled for February 8, Prime Minister Takaichi is unlikely to reverse course on her plan to remove the 8% sales tax on food, as deteriorating affordability is a key concern for voters.

Bull vs. Bear: The Outlook for Japan's Finances

The Bull Case

Optimists point to several factors that could help shore up government finances. Japan's low unemployment and expected wage growth could boost tax revenues. Other potential sources of income include new stamp duties on real estate purchases by non-Japanese citizens and the targeted removal of certain tax breaks. Proponents believe that once yields adjust to reflect normalizing policy, demand for JGBs from domestic institutions and the public will stabilize over the medium-to-long term.

The Bear Case

Pessimists argue that even if tax increases or spending cuts are implemented, rising social security costs will continue to strain the budget. This persistent spending pressure will make it difficult to significantly reduce the issuance of new government bonds, keeping the debt pile growing.