Russia FX Beat - July 20, 2017

> Today's focus. ECB press conference - waiting for Draghi.
> Global trigger: Draghi to talk euro lower? The main event today is undoubtedly the ECB meeting. While there is no question that interest rates and QE will remain unchanged (14:45 Moscow time), there is interest surrounding President Draghi's press conference, which begins at 15:30.
While there are ongoing discussions within the ECB about how it will taper its EUR 60 bln per month QE from early next year, we would be shocked if Draghi were drawn into details on this. Another hawkish surprise could be the removal of its leaning toward expanding rather than shrinking QE. This would first appear in its statement at 14:45, in which the ECB has long said that it "stands ready to increase" QE's size or duration, or both.
More likely is that Draghi will aim to avoid controversy altogether by stressing that, despite improving activity, inflation of 1.3% y-o-y remains far below the bank's 2% target.
Although the ECB's mandate is inflation, not the exchange rate, the euro's recent strong performance presents a risk that Draghi will try to talk the currency weaker.
> Bottom line. The risk that Draghi pushes the euro sharply lower today is not insignificant. If this happens, EUR/USD might test the 1.1450 area.
> Regional trigger: Reassuring CPI. CPI for the week ending July 17 held at 0.1% w-o-w. Important is accelerating food disinflation, the continuation of which we see as the base case for the next few weeks. If this happens, the July CPI may be close to 0.5% m-o-m, keeping the y-o-y rate at 4.3-4.4%. This outcome would keep alive the possibility that the CBR will cut rates by 25 bps to 8.75% next week.
The CBR has released updated quarterly external debt data. Including July, it showed a little over $40 bln due for repayment by non-financial companies before year end. An accompanying survey showed that companies could roll over a large portion of these payments. However, as is usually the case, redemptions are highest in December, which might lead to short-term FX liquidity's being pressured toward year end.
For the time being, carry-friendly conditions, combined with a more supportive oil price backdrop, are lending support to the ruble.
> Bottom line. USD/RUB is trading with a downside bias. We expect it to hold near 59 or to dip below this level in the near term.