Russia FX Beat - August 8, 2017

> Today's focus. OPEC meeting.
> Global trigger: Quiet trading. Yesterday, Fed regional presidents James Bullard and Neel Kashkari, who are known to have dovish views, said that they expected a start to balance sheet reduction at the next meeting, helping to ease worries about market volatility. They also said that the current inflation trend in the US was a problem and that they did not expect a rate hike at the next meeting. After their remarks, the dollar declined only slightly against peers thanks to tepid trading in global FX markets, and the 10y US Treasury dropped by 2-3 bps in yield.
North Korea condemned the latest UN sanctions against it, which could trim around a third of its exports, and rejected negotiations over its nuclear weapons program.
China released trade data for July this morning. Exports (7% y-o-y) grew slower than imports (11%), but both fell short of expectations.
The meeting of the committee monitoring implementation of the OPEC deal will end today.
> Bottom line. EUR/USD is likely to test 1.1840 today.
> Regional trigger: Low volumes, ruble tracking oil. USD/RUB trading on MOEX dropped to below $4 bln yesterday amid a lack of bids for dollars from locals and foreigners following the conclusion of most dividend payouts. Much of the ruble's performance will depend on oil in the near term.
Assuming a positive outcome from today's OPEC meeting and further draws in US crude stocks, which the API is expected to announce late this evening, USD/RUB could slide back to 59.80 and lower; should this support not materialize, weaker oil could push it back to 60.40 and higher.
We expect the correlation between the ruble and oil to gradually strengthen, although without active dollar selling by exporters, the ruble will continue to lag changes in oil prices.
We see additional pressure coming at the end of the week, when Gazprom will make dividend payments to foreign shareholders.
> Bottom line. USD/RUB could test 59.80 on higher oil prices today.