Russia FX Beat - June 19, 2017

> Today's focus. Macron's mandate for change, Brexit talks.
> Global trigger: Brexit begins. The week ahead is scheduled to be rather quieter than last week. There are few obvious catalysts for major market moves. Last week the dollar stabilized after prior losses. The DXY Index is steady just above 97, a good distance from key support levels nearer 96.
The US data schedule is light this week, with the highlight likely to be May durable goods on Friday. Several Fed members are due to speak, including Bill Dudley today at 15:00 Moscow time and Charles Evans overnight at 02:00. Both are FOMC voters.
The early interest this week will surround the EU. Yesterday French President Macron won a convincing majority in the parliamentary elections, thereby securing a healthy mandate to proceed with his reform agenda. The EU can take this momentum into today's formal launch of Brexit negotiations, which are likely to be a tortuous process over the next 18 months.
> EUR/USD is stuck near 1.12, awaiting a catalyst.
> Regional trigger: CBR reverts to 25 bps. In the end, Friday saw the CBR take a more cautious approach and cut its key rate by just 25bps, to 9%. This was in line with our forecast.
The CBR's statement and Governor Nabiullina's press conference were balanced, giving little new away about the likely scale of easing in 2H. Our interpretation is that the CBR's priority is to keep its options open and to avoid the pre-commitments of the type it made last year. However, in talking up several medium-term risks to inflation, we think the CBR probably wants to reorient investor expectations back toward a norm of 25 bp, not 50 bp, policy steps. For more, see our note, "CBR Review: Back in the 25 bp Groove," published on Friday.
The ruble's struggles last week owed mostly to the progress through the US Senate of a new sanctions bill on Russia. Investors will this week be looking to see when the lower house is likely to vote and the likelihood of the vote being passed and/or whether it will be altered.
Russia will see retail sales, labor market and wages data tomorrow. Today may see comments from CBR Deputy Governor Yudayeva.
> Bottom line. The Fed last week helped curtail dollar weakness, while US sanctions news flow pushed Russia's sovereign CDS to its highest level since April. There is little resistance preventing USD/RUB from a test of 58.