Russia FX Beat - December 12, 2017

> Today's focus. Brent tops $65/bbl on North Sea pipeline closure.
> Global trigger: Markets range-bound ahead of Fed. Yesterday was a quiet start to the week, with the dollar's performance mixed. EUR/USD edged its way back up to 1.18 ahead of Fed and ECB meetings later this week.
Overall, volatility in DM FX is very subdued. So far in 4Q, European currencies have traded closely in line with EUR/USD. Quarter-to-date, the correlations for the Hungarian forint, Polish zloty and Czech koruna are all above 0.90. The Norwegian krone and Swedish krona correlations are closer to 0.50, while those of the British pound and Japanese yen are further behind.
Today the schedule of events picks up somewhat. The US reports include NFIB sentiment (14:00 Moscow time) and PPI (16:30). More important CPI data arrives tomorrow. In Europe, the UK offers CPI (12:30) and Germany the ZEW survey (13:00). ECB President Draghi speaks at 22:00 but is unlikely to offer much new ahead of Thursday's ECB decision.
> Bottom line. EUR/USD should hold above support at 1.1760 heading into tomorrow's Fed meeting.
> Regional trigger: Oil outage. Brent surged as much as 4% from its intraday low yesterday to trade above $65/bbl for the first time since mid-2015. The sharp rise came as a result of a halt to the flow of oil along the vital Forties Pipeline System in the North Sea, which transports as much as 400 kbpd of Brent. The pipeline is set to be closed for "several weeks" while it is repaired.
For the most part yesterday, the ruble ignored the move in oil, holding above 59 against the dollar. However, USD/RUB relented late in the session and has since briefly pushed below 58.8.
Despite the material decline in the ruble's positive correlation with oil this year, the currency certainly still reacts when energy prices are impacted by a new development.
Overall, we do not envisage this particular pipeline closure to be a lasting story for the FX market. And in any case, it will be offset by the rise in Finance Ministry FX purchases this month to $3.5 bln.
The Russian market might receive some excitement later in the week. For more on our view that the CBR will cut rates 25 bps on Friday, please see our preview published yesterday.
> Bottom line. With Brent above $65/bbl, USD/RUB will likely head toward 58.50. However, we see the move as short-term in nature and view it as a good opportunity to buy dollars.