Russia FX Beat - December 22, 2017

> Today's focus. Catalonia independence push? US inflation data.
> Global trigger: Catalonia results. This year's major issues have been settled or pushed into 2018. FX volumes are low, and investors will not take new risks during the holiday period.
Of the major currencies we follow, only the Turkish lira has fallen against the dollar this year (-8%). The top performers - the Polish zloty (+18%), the euro (+13%) and the Hungarian forint (+12%) - all benefitted from the eurozone reflation theme.
Risk conditions have been favorable, as FX volatility has fallen. The elections in France and the Netherlands passed by calmly, and the markets have been unperturbed by Brexit, North Korea and even all the noise from Trump's first year in charge. Whether such benign conditions will persist in 2018 is another matter.
Today is actually a very busy day for US data. At 16:30 Moscow time, the PCE deflator, the Fed's preferred inflation measure, is due. At 1.4% y-o-y, core PCE is far below the Fed's 2% target. Durable goods data is due at the same time. Aside from a brief wobble in the euro, markets have so far been little affected by election results from Catalonia showing independence parties winning a majority of seats but not the popular vote. An anti-independence party was the biggest individual winner.
> Bottom line. The 10y UST yield is nearing 2.50%. If this level is broken, EUR/USD could move toward 1.18.
> Regional trigger: Oil back to $65/bbl. USD/RUB has been range-bound all year between 56 and 61, and currently sits at the very center of this range. The year is coming to a close with implied ruble volatility at or very close to the lowest YTD (depending on the tenor).
Yesterday, the CBR reported that inflation expectations remained steady at 8.7% in December. Households perceived the current rate of inflation to be 10%, down slightly from 10.4%. CBR First Deputy Governor Ksenia Yudaeva commented that she saw no "serious" risks to the ruble from the new FX intervention rule that comes into effect after the long holiday break.
The ruble is also gaining support from a Brent price that is making a renewed effort to break above $65/bbl.
> Bottom line. Given the quiet market, FX sales for taxes due on Monday are likely near an end. The 200-day moving average of 58.15 should prove the limit for USD/RUB amid thin trading.