Russia FX Beat - July 25, 2017

> Today's focus. Potential US vote on sanctions. Tax day.
> Global trigger: Range-trading into Fed meeting. EUR/USD has held close to its recent high and will likely stay so into tomorrow's Fed rate decision. We lay out our views for the meeting in "Federal Reserve Preview: No Hike, But a Hint of Concern?", published yesterday.
With no change to its 1.25% rate, the focus is on the statement to the decision. Our view is that the Fed will be non-committal given that there are eight weeks until it next meets. One risk though is that it indicates more concern over stubbornly low inflation.
Today's schedule is relatively uneventful. Germany's IFO survey (11:00 Moscow time) is expected to replicate yesterday's PMI data and edge slightly lower, while at 17:00 the US sees consumer confidence sentiment.
> Bottom line. We expect the DXY Index to hold close to 94 today and into the Fed decision. The risk is to the downside.
> Regional trigger: Sanctions vote. The ruble was the clear underperformer yesterday with a decline of around 1% against the dollar driven by news that the US Congress is set to pass new sanctions against Russia before the summer recess. It also appears that President Trump will not object, leading the path clear to the sanctions rapidly coming into force. A vote by the lower house is reportedly set to take place today.
Despite the proposed sanctions bill including little new tangible to that proposed in mid-June, its smooth progression through Congress will bake existing, easily cancellable sanctions into law for a much longer term. It also opens the way to new investigations and further-reaching measures.
Yesterday's meeting of major oil producers saw agreement to focus in future more on the level of crude exports. Saudi Arabia is to cap its exports in August to 6.6 mln bpd, a cut of 1 mln bpd y-o-y. However, any positive sentiment from this for oil will be offset by Libya and Nigeria's ability to continue pumping almost at will.
Today is the major July tax deadline for MET, excise duties and VAT. In all, some R600 bln is due for payment. Most conversion required will already have been conducted, although with profit taxes still due on Friday, the ruble could find some support.
> Bottom line. USD/RUB is well balanced near 60. We would prefer to use any local demand for the ruble as an opportunity to reset USD/RUB long positions, targeting the 60.40 area.