Russia FX Beat - December 6, 2017

> Today's focus. US jobs data pointer and EIA oil inventories.
> Global trigger: EUR/USD stuck. EUR/USD has been stuck in a range of 1.1800-1.1950 for the last two weeks, close to our year-end target of 1.18. We see the following as capable of triggering a break out of this range: the next Fed and ECB meetings (December 13 and 14), regional Spanish elections (December 21) and passage of US tax reform.
Today there is little obvious on the agenda to get markets too excited. ADP employment data from the US is due at 16:15 Moscow time, ahead of Friday's jobs report. The Bank of Canada is set to hold interest rates at 1% (18:00).
In general, risk sentiment has soured slightly. Major equity indexes in the US and Asia have been down for three successive days, and UST 10y yields have moved back below 2.40%. This is worth watching in coming days to see if it filters into FX markets.
> Bottom line. DXY resistance at 93.35 may limit the dollar.
> Regional trigger: No CBR guidance. November CPI was confirmed at just 2.5% yesterday, down from 2.7% in October and a new record low. Headline inflation in Russia is currently below that in Turkey, Mexico, South Africa, Brazil, Romania, India and even the UK. The drop to 2.5% was in line with the consensus forecast and fits with CBR expectations that CPI will end the year in a range of 2.5-2.7%.
In remarks yesterday, CBR official Igor Dmitriev failed to take the opportunity to provide guidance on next week's rate decision. Still, it may come before the black-out period begins at the end of this week. Prior to its last two meetings, the CBR said it was considering 25 or 50 bp reductions. In September, it cut rates by 50 bps, and in October by 25 bps. How much it will cut by next week is still a toss-up, so for now we stick to our expectation of a 25 bp cut.
Yesterday, the Finance Ministry announced that it would buy $3.5 bln of FX in the period starting tomorrow and lasting until December 28. This works out to around $215 mln per day, a sharp acceleration from last month's $100 mln pace and a faster pace than the one seen during the brief period of CBR interventions in May-July 2015. The heavier interventions are a preview of what is to come in 2018, when the new budget rule kicks in, probably putting up a decent headwind in front of the ruble.
> Bottom line. Russian weekly CPI and EIA US oil inventory data might impact an otherwise flow-driven USD/RUB today. USD/RUB may test support in the 58.65-58.70 area.