Russia FX Beat - December 19, 2017

> Today's focus. US House to vote on tax bill. South Africa buoyant.
> Global trigger: Tax vote today. After a quiet start, the week should liven up today with an expected vote on a final US tax bill by the House. If passed, the bill would likely be voted on by the Senate tomorrow, paving the way for President Trump to sign it into law before the end of the week.
In Europe, voters in Catalonia go to the polls on Thursday to elect a new regional government. Final pre-election polling showed parties favoring independence holding a slim majority. A result along these lines would pose challenges to forming a ruling coalition and would most likely not provide momentum for a renewed independence push.
In comments yesterday, Neel Kashkari, a dissenter to last week's Fed rate hike, said that low inflation and a flattening yield curve were the main factors behind his vote for no change. Our two-hike forecast for next year is based on similar arguments.
Outside of US tax developments, today sees Germany's Ifo survey at 12:00 Moscow time and US housing starts and current account data at 16:30.
> Bottom line. EUR/USD to hold close to 1.18 today.
> Regional trigger: All about South Africa. The big EM focus right now is South Africa, where the rand yesterday surged on the outcome of the ruling ANC party's leadership battle. Ahead of a presidential election in 2019, the ANC yesterday chose Cyril Ramaphosa as its new leader. Ramaphosa is viewed as business-friendly and pro-reform. This is in contrast to his rival Nkosazana Dlamini-Zuma, President Jacob Zuma's ex-wife, who is seen as more of a populist.
Outgoing President Zuma has been central to various corruption and graft scandals in recent years, which have led to a steep discount in South African financial assets, including the rand. The prospect of Zuma's early departure and a replacement committed to fighting corruption has buoyed local markets, with USD/ZAR dropping below 13.00.
This positive sentiment might continue to drip-feed into otherwise quiet EM markets. The ruble strengthened slightly yesterday on relatively low volumes. Today, Russia sees November unemployment, wage and retail sales data. This follows the woeful 3.6% y-o-y drop in industrial production reported late last week.
> Bottom line. USD/RUB might drift toward 58.50 today.