Russia FX Beat - August 21, 2017

> Today's focus. Quiet day: Essar Oil deal done, Trump speaks.
> Global trigger: Awaiting Yellen and Draghi. This week, investors will be watching the Fed's annual symposium in Jackson Hole, Wyoming, which will start on Thursday, for triggers.
On Friday, Fed Chair Yellen speaks on financial stability and ECB President Draghi will also give a speech. We do not expect either to deliver any major surprises to markets. Market pricing for tighter Fed and ECB policy is subdued currently, and both central banks are satisfied with this.
Although sourced reports last week quashed expectations that Draghi would offer new guidance on QE tapering, the euro held strong. To us, the risk this week is that EUR/USD will head lower toward 1.16. Draghi is also due to speak on Wednesday.
As for today, there is pretty much nothing on the docket. Attention will no doubt fall on a national address by US President Trump, scheduled at 06:00 Moscow time, but the topic of military strategy in Afghanistan and South Asia is not particularly important for markets.
> Bottom line. We prefer to sell any EUR/USD rallies that take it toward 1.18.
> Regional trigger: Essar Oil deal done. A little over R500 bln of monthly taxes comes due on Friday. Last week, the ruble was one of the top performers (rising 1.2% versus the dollar), managing to outperform despite generally subdued FX selling by exporters. Should exporters become more active ahead of Friday, USD/RUB could push below 59.
If, as we expect, Fed and ECB rhetoric turns out to be on the dovish side, this, too, will improve carry-trade sentiment, given the ruble's attractive yield.
This morning, Rosneft, Trafigura and United Capital Partners announced the completion of the $13 bln deal to purchase a 49% stake in Indian Essar Oil. On our estimates, FX liquidity in the Russian banking sector has fallen by $10 bln this year, in part due to the deal. A fuller picture of its strain on local FX liquidity will emerge in early September.
> Bottom line. Tax payments suggest that USD/RUB will mount a serious test of 59 this week.