Russia FX Beat - July 18, 2017

> Today's focus. US politics puts dollar under renewed pressure.
> Global trigger: Healthcare blow. Yesterday proved a quiet start to the week, with US stock indexes inching up to intraday record highs and EUR/USD pushing above 1.15. US Empire State manufacturing survey data underwhelmed, continuing the theme from last week.
The main news came overnight with the Republican-held US Senate effectively abandoning its attempt to repeal and replace Obamacare. The failure to secure sufficient support to progress a key Trump policy item is damaging on its own, but also likely to prevent advances in other areas of the president's policy agenda, including long-awaited tax reform. The dollar fell sharply on this news, with EUR/USD reaching a high of 1.1538.
Today will be equally quiet in terms of scheduled events, with no US data of note. Germany sees ZEW investor sentiment at 12:00 Moscow time. In the UK, should June CPI (11:30) reach 3% y-o-y, it would increase the pressure for interest rates to be raised for the first time since 2007. This in turn would help GBP/USD build a more solid foundation after its move back above 1.30 last week.
> Bottom line. EUR/USD is near crucial resistance in the 1.1550 area, beyond which gains would accelerate.
> Regional trigger: Balanced flow. Oil prices traded sideways through most of yesterday (Brent held close to $49/bbl), and the ruble was also little moved. However, overnight oil prices sagged on reports that Libya had raised its oil output to 1.05 mln bpd, the highest in four years. Libya is currently exempt from the OPEC output cuts. In addition, the EIA released a forecast projecting US shale production to reach a record high of 5.58 mln bpd in August.
The CBR published a report yesterday highlighting that foreigners sold down holdings of OFZs in June. The reduction in exposure occurred mainly later in the month as a result of geopolitical and oil market developments rather than uncertainty over the CBR rate outlook. Foreign OFZ ownership dipped back below 30% from the record 30.7% at the start of June. Local banks filled the void left by foreigners.
> Bottom line. Softer oil prices may pressure the ruble today, but the nearing busy tax and dividend period should provide a cushion, capping USD/RUB near 59.50.