Russia FX Beat - August 16, 2017

> Today's focus. Can Fed minutes wake markets from their lethargy?
> Global trigger: Fed minutes to shed new light. The dollar enjoyed good support yesterday from better than expected US retail sales and manufacturing sentiment data. In particular, strong retail sales in July suggest a good start to 3Q GDP, given that private consumption contributes almost 70% to US GDP. This also lends support to the Fed's view that it will raise rates a further 25 bps before year end.
In response, the dollar rallied across the board. The DXY Index rose briefly above 94, while EUR/USD edged below 1.17 before recovering. It seems that demand for EUR/USD will stay strong heading into next week's Fed convention, at which ECB President Draghi is due to speak.
Today, the main market focus will be on the release of minutes to the Fed's July 26 meeting, at which rates were held unchanged at 1.25%. Important will be hints on when the Fed intends to begin reducing its balance sheet (we think this is likely on October 1) and any increase in concern over low inflation. Prior to this, the Eurozone releases revised 2Q GDP data at 12:00 Moscow time, for which the consensus is 0.6% Q-o-Q growth.
> Bottom line. EUR/USD to hover close to 1.1750.
> Regional trigger: ruble bucks the trend. USD/RUB held in a narrow 40 kopeck range yesterday amid subdued turnover. Along with the South African rand and Brazilian real, the ruble was one of the few currencies to hold its ground against a strengthening dollar.
In quiet summer markets, there is little reason for USD/RUB to move decisively out of its recent 59-61 range. We do note, though, the convergence of the 50d and 200d moving averages close 59.40, which represents an important support level for USD/RUB.
Today, we will look to the weekly CPI data at 16:00 for guidance on the 25 versus 50 bp rate cut debate at the upcoming CBR meeting on September 15. A third straight negative w-o-w reading would support those arguing for a larger cut.
Weekly US EIA oil inventory data is released at 17:30. API data overnight showed a 9.2 mln bbl crude oil decline, suggesting downside risk to the consensus of -3.4 mln bbl for today. More important might be whether gasoline inventories also fall.
> Bottom line. The ruble can outperform EM FX peers over the near term, but we do not think USD/RUB will fall below 59.5.