Russia FX Beat - August 23, 2017

> Today's focus. Weekly CPI and oil statistics to spur ruble?
> Global trigger: Dollar stuck. EUR/USD remains range-bound, as it has been for most of August. For now, there is insufficient conviction to push it sustainably back below 1.17 or above 1.18. Whether speeches by Fed Chair Yellen and ECB President Draghi on Friday will alter this remains to be seen.
In a speech overnight, President Trump said that he was prepared to bring the government to a standstill if Congress does not fund his US-Mexico border wall. He has asked for an initial $1.6 bln to begin construction. His brinksmanship comes with Congress needing to pass a spending bill by September 30 in order to not run out of money. It is believed that Congress has until mid-October if it is to avoid a formal default. By way of context, the US has run very close to its so-called "debt ceiling" several times in recent years. But the Trump/border-wall factor could add more anxiety than usual.
> Bottom line. EUR/USD to stay stuck in a 1.1750-1.18 range. Fed voter Robert Kaplan speaks at 20:05 Moscow time
> Regional trigger: Weekly CPI data. USD/RUB held in a very narrow 20-kopeck range yesterday. Amid low turnover of just $3 bln, selling pressure from foreign investors and exporters (ahead of Friday's tax deadline) was once again insufficient to push USD/RUB firmly below 59.
Ruble volatility is trending lower. The closely followed USD/RUB three-month implied volatility gauge yesterday reached a post-2014-ruble-float low of around 11.86%. This shows that the ruble market continues to mature. Declining volatility will be welcomed by the likes of the CBR, but although it has previously named this as a precondition for FX purchases, no such action is expected anytime soon.
Indeed, the CBR's near-term focus remains locked on inflation. Today weekly CPI data at 16:00 will be watched following three consecutive 0.1% w-o-w declines. Market pricing is currently biased toward a 50 bp rate cut on September 15. For now, we are leaning toward a smaller 25 bp cut to 8.75%.
> Bottom line. USD/RUB is lethargic. A bullish EIA oil inventory report (17:30) could take it toward a test of 59.