Russia FX Beat - August 18, 2017

> Today's focus. Fed and ECB content with weaker currencies.
> Global trigger: ECB-Fed currency war? For the third straight day, EUR/USD hit a lower intraday low yesterday, reaching 1.1662. But, as had happened the previous two days, the decline was then met with strong demand, which drove a rapid recovery to 1.1750.
The catalyst for yesterday's decline was minutes from the ECB's July 20 meeting. They contained a rare reference to the level of the euro, saying that "concerns were expressed about the risk of the exchange rate overshooting in the future." The ECB's concern is legitimate given that its trade-weighted measure of the euro is at its highest level since 2014 and that inflation continues to languish well below its 2% CPI target.
We have previously highlighted the risk of a verbal intervention and this has the hallmarks of a warning shot. The higher the euro rises, the longer the ECB may wait to taper QE.
We hear similar rhetoric from the Fed. Overnight, voter Robert Kaplan said that he was patient on the timing of the next hike and that "a weaker dollar, all things being equal, is helpful."
Today's schedule is very quiet. The data highlight will be US consumer sentiment, due at 17:00 Moscow time.
> Bottom line. EUR/USD to hold near 1.1750 on a quiet day.
> Regional trigger: Exporters return. The ruble made gains for the third day in a row yesterday as domestic exporters, who had been largely quiet in previous days, returned to the fray, selling FX. Combined with foreign investors, who are on balance buyers of the ruble, this helped USD/RUB to finish just below the important support level of 59.40.
In the evening, the Brent price bounced sharply away from $50/bbl, providing USD/RUB with the momentum to mount a test of 59.
The USD/RUB chart suggests that the ruble will appreciate in the near term. The pair is on the cusp of a break below its 50d and 200d moving averages and looks set to test the lower end of the trend channel established early this month. Below this, USD/RUB support is in the 58.75-58.80 area.
> Bottom line. Given the upcoming tax period, the risk of a short-term USD/RUB move below 59 is growing.