Russia FX Beat - August 7, 2017

> Today's focus. Fed speakers.
> Global trigger: Mixed signals. Strong US jobs data gave a significant boost to the dollar on Friday. The DXY gained 1%, EUR/USD dropped to as low as 1.1728 and the 10y Treasury rose in yield by 6 bps. The data showed that payrolls had added 209,000 workers in July, beating expectations. In addition, the June numbers were revised higher to 231,000. Average hourly earnings, which grew by 2.5% and were in line with the market's expectations, highlighted the subdued inflation trend. There is still not a majority in the market expecting a third rate hike this year.
This week's calendar is relatively busy. At the center of attention will be speeches by Fed members James Bullard and Neel Kashkari today, William Dudley on Tuesday and Robert Kaplan on Friday. In addition, the market will be looking toward US CPI data for July, due on Friday, which will tell us more about the inflation trend.
Today, parties to the OPEC deal will meet to look at why some are not fully implementing their allotted cuts.
> Bottom line. EUR/USD to recover back to 1.1800 and higher.
> Regional trigger: 2016 dividend payments winding down. Gazprom (R190 bln) and Transneft (R60 bln) were some of the last companies to pay out their annual dividends, last Friday. FX selling was limited as most of the payments were made using retained rubles. This week we expect the second leg of Gazprom dividends, in the amount of $1.2 bln, which could be negative for sentiment toward the ruble.
As the dividend season has wound down, we have seen less FX buying pressure as some large international investors are taking profit on their long USD/RUB positions. Meanwhile, exporter FX selling has remained subdued. Without bids for dollars, oil dynamics will drive USD/RUB.
According to CFTC data, in the week ending August 1, the number of ruble short contracts dropped for the first time in six weeks, while longs continued to fall, as well, to near two-year lows.
> Bottom line. USD/RUB, subject to oil dynamics, will remain closer to the lower end of the 59.90-60.20 range.