Russia FX Beat - July 19, 2017

> Today's focus. Weekly US oil inventories and Russian CPI.
> Global trigger: Dollar on the edge. The dollar crumbled yesterday as investors scaled back expectations for any meaningful fiscal reform or stimulus over coming months. The trigger for this was the withdrawal on Monday evening of a bill to replace Obamacare.
Post US election euphoria has become all but a distant memory as political gridlock adds to a stuttering economy and below-target inflation. Given this backdrop, a US equity market that is at a record high appears increasingly vulnerable.
EUR/USD surged to as high as 1.1583 yesterday. And with the euro the best-performing currency this year (+10% versus the dollar), this adds a layer of intrigue to tomorrow's ECB meeting.
Sourced reports suggest the ECB is working on plans on how to communicate a tapering path for its EUR60 bln per month QE program. However, this is more a topic for September, and if anything, we see the main risk tomorrow being that ECB President Draghi actively attempts to talk the euro lower.
> Bottom line. The DXY Index closed below key trend support yesterday and is now targeting its 2016 August low of 94. EUR/USD has set its sights on the 1.1616 high from May 2016.
> Regional trigger: CPI key for CBR. USD/RUB held steady yesterday, with local ruble demand balanced by international dollar buying. Ruble price action has taken on a summer holiday feeling, with volumes yesterday at a muted $3.9 bln on MICEX.
Fresh headlines are therefore required to shake USD/RUB from its current range or dividend/tax-specific corporate flow. The former could come courtesy of oil price volatility today, with US EIA oil inventory data due at 17:30 Moscow time. Talks are also set to take place in Minsk between Ukraine, Russia and separatists. This follows a statement from US Senator John McCain imploring Congress to pass its sanctions bill on Russia.
The Russian rates market is also quiet. However, weekly CPI data today at 16:00 could be critical in shaping expectations for a CBR rate cut next week. Consumer and labor market data are also due at the same time.
> Bottom line. USD/RUB is comfortable in a 59.0-59.4 range for the time being. Barring a bearish set of oil statistics today, the weak dollar and forthcoming dividend payments suggest a slight downside risk toward 59 over the next few days.