Russia FX Beat - June 26, 2017

> Today's focus. Durable goods orders and Draghi comments.
> Global trigger: Yellen tomorrow. A quiet few days has allowed markets to focus on the shape of the US yield curve, with its continued flattening raising concern about the potential for a sharp slowing of the US economy. Although US data has not been so strong of late, to us recent bond yield movements are more a reflection of falling inflation expectations.
To this end, US PCE inflation on Friday will be very closely watched. The consensus looks for the core measure to slip to 1.4% y-o-y from 1.5%, far below the 2% target. This is a key reason why market pricing for a Fed hike in coming months is so low.
Prior to this data, we will watch closely comments from Fed Chair Yellen, who is scheduled to talk tomorrow in London.
Today the US sees durable goods data, while in Europe ECB President Draghi is scheduled to speak at 18:00 Moscow time and Germany releases its Ifo survey at 11:00. Improving confidence in the Eurozone has been a driving force for the euro lately.
> Bottom line. We expect EUR/USD to nudge above 1.12 today, but Yellen offers risks for tomorrow.
> Regional trigger: Oil finds a bid. The ruble stabilized over the second half of last week, helped by an oil price which finally found some support. Indeed, a chart of Brent trading today indicates the potential for continued constructive price moves near-term. We have monitored a very distinct falling trend channel of late. A Brent close today at $46/bbl or higher would be bullish, helping USD/RUB to edge below 59.
In Russia, the rates market will continue to focus on the nearing completion of the sale of a stake in Essar Oil to a Rosneft-led consortium. On Friday it was reported that 23 banks in India had approved the $13 bln deal. As anticipated, XCCY rates continue to shift lower, as dollar outflows presumably intensified.
Back to the ruble and today, we note that major taxes are due for payment. MET and VAT bills of around R600 bln may generate further demand for the ruble, although most of the necessary sales of FX to meet these payments has likely already been done.
> Bottom line. USD/RUB has opened today sharply lower, as oil prices have finally found at least a temporary floor. We expect USD/RUB to settle near 58.80.