Russia FX Beat - January 9, 2018

> Today's focus. Risk sentiment strong and oil prices rising.
> Global trigger: Positive start to 2018. Global financial markets have started 2018 on something of a tear, with the dollar bearing the brunt of upbeat sentiment. Several currencies are up over 1% against the dollar since trading reopened, led by the Mexican peso and Brazilian real. The S&P 500 is up 2.8% YTD at a record high.
The dollar's fall, which saw EUR/USD move above 1.20 for the first time since September, has come despite generally solid US data.
Overall, investors have cash to put to work and are keen to take advantage of very low volatility. Markets are in something of a goldilocks period, where the global economy is running neither too strong nor too weak. With the euro expected to benefit from the eurozone reflation trade this year, investors have preferred to fund new positions with dollars.
For what remains of this week, there is some important US data due, including NFIB sentiment today and CPI and retail sales on Friday. Over the coming days, President Trump may unveil his choice for the new Fed vice chair.
> Bottom line. The 1.1950 support level provides an early test for EUR/USD sentiment and whether the pair can return to 1.20.
> Regional trigger: No FX buying. Russian markets were open for part of last week, but national holidays ensured that volumes were very low and only indicative. With liquidity returning on the first proper trading day this year, it will be interesting to see to what extent the ruble plays catch-up with global markets today.
The ruble should also be assisted by Brent, which has risen above $68/bbl to its highest levels since mid-2015. The weak dollar is helping this move, and we note that the oil benchmark is close to important resistance levels near $70/bbl.
Also helping the ruble this week is the absence of FX buying by the Finance Ministry. Daily purchases of $200 mln or more ended on December 28, and we do not expect them to resume until January 15 (although they will pick up to a record level when they do).
As corporate treasury desks of large Russian exporters return to work this week, they will see a positive market backdrop and good reason to actively sell FX.
> Bottom line. The ruble is biased higher as local markets return to full pace. USD/RUB may dip below its September low of 56.80.