Russia FX Beat - May 16, 2017

> Today's focus. Fresh accusations against Trump.
> Global trigger: Dollar drift. The dollar is under pressure following allegations that US President Trump revealed highly classified intelligence to the Russian foreign minister and ambassador last week. DXY broke through the 98.97 support level as marked by the Fibonacci 50%, and the next major support level is 98.50. Importantly, EUR/USD has also climbed above the 1.1023 high seen in the aftermath of the French presidential election result. Yesterday, French President Macron named center-right candidate Edouard Philippe as France's new prime minister in an attempt to gain broad support from centrist parties and form a strong government at next month's parliamentary elections. Macron also met with German Chancellor Merkel, with the two EU figureheads promising cooperation and a closer union.
Despite the softening dollar, markets are still almost fully pricing in a June 14 rate hike to 1.25%. US housing starts (15:30 Moscow time) and industrial production (16:15) are unlikely to alter this. However, a positive ZEW investor sentiment report from Germany (12:00) could force EUR/USD back toward its recent high.
> Bottom line. Having broken higher, EUR/USD could go on to target 1.1050.
> Regional trigger: No FX interventions planned over the near term. Putin said yesterday that the authorities are not planning any artificial measures to influence the ruble that would severely affect the country's economic competiveness. He praised the CBR's monetary policy, stressing that the exchange rate is "satisfactory" but that the regulator should remain cautious.
Meanwhile, Igor Dmitriev, head of the CBR's monetary policy department, said that inflation could deviate from the 4% target as it remains vulnerable to factors that could be reversed, such as the oil price and fruit and vegetable prices. Dmitriev said that until inflation stabilizes, no FX purchases are possible. The CBR has no plans to intervene on the FX market unless it sees a threat to financial market stability.
> Bottom line. USD/RUB could test 55.90-56.00 today thanks to the higher oil price.