Russia FX Beat - August 15, 2017

> Today's focus. North Korea comments suggest de-escalation.
> Global trigger: US retail sales. After its rapid appreciation from 1.08 to 1.18 between May and July, EUR/USD has stabilized in August. This owes in part to the view that the pace of euro appreciation will potentially disrupt any ECB plan to reduce its QE asset purchases.
In addition, continued mixed economic data out of the US has left markets skeptical that the Fed will raise rates again this year. For the Fed to hike rates before year end, a significant re-pricing by markets will be required (a hike is currently just 40% priced in), which would be dollar supportive. Overnight, NY Fed chief William Dudley reiterated his support for another hike this year.
The US will be in focus today with the release of retail sales data for July and Empire State manufacturing sentiment at 15:30 Moscow time. Tomorrow sees the release of minutes to the Fed's July 26 policy meeting.
Elsewhere, risk assets have caught a strong bid overnight on the first signs of a de-escalation of harsh rhetoric between North Korea and the US. North Korean media reported that leader Kim Jong Un had said he would "wait a little more" before taking a decision to conduct further missile tests. The S&P 500 rose 1% yesterday, while the CHF, JPY and gold prices all fell.
> Bottom line. EUR/USD to hold close to 1.1750 today.
> Regional trigger: Dividends are done. The dividend season is now all but over. We think purchases of FX by international custodians for Gazprom ADR holders (we estimate dividends owed to them at $0.8 bln) took place by August 11.
Local custodians should have received ruble payments from Gazprom by August 4 and, according to local regulation, could only have held these funds for up to a week (until August 11). Ruble payments should have then been transferred to international custodians (i.e. BNY, JPM), who convert or buy dollars immediately. Then, within a week, the money is to be paid to Gazprom ADR holders, with few implications for the market. Thus, any final dividend-related FX purchases would have been made on Friday and we do not expect further pressure on the ruble from dividends.
> Bottom line. Oil prices fell sharply overnight. As far as the ruble is concerned, this will offset any positive sentiment owing to the comments out of North Korea. USD/RUB should trade toward 60 ahead of the US macro and oil inventory data.