Russia FX Beat - November 16, 2017

> Today's focus. Markets calmer, Nabiullina to speak.
> Global trigger: Calmer. EUR/USD reached a high of 1.1860 yesterday, its best level since the ECB announced its 2018 QE plans on October 26. Then, after decent US CPI and retail sales data, the dollar stabilized and recovered slightly.
US core CPI edged up to 1.8% y-o-y in October. Although inflation is still below the Fed's 2% target, this was the first increase in the annual rate in 2017. Retail sales also advanced in October, while September's hurricane-related bounce was revised still higher. The US remains on track to raise rates 25 bps on December 13.
Overall, markets calmed somewhat yesterday, pausing the recent sharp rise in risk aversion. Equity markets fell across the board at the open, but pared sharp losses thereafter. Commodities performed similarly, with losses concentrated among base metals, perhaps playing to the view of some that concerns are resurfacing regarding China's growth momentum.
> Bottom line. With several Fed officials speaking today, we expect some support for the dollar and see EUR/USD holding near 1.18.
> Regional trigger: Nabiullina speaks. Russian CPI climbed 0.1% w-o-w in the week ending November 13. After several weeks of growth, prices of fruits and vegetables were flat. Overall, the report can be considered neutral, and at this point monthly CPI may come in at 0.3-0.4% m-o-m. This would be consistent with our year-end CPI forecast of 2.6%. Today CBR Governor Nabiullina is due to speak at a Duma committee hearing at 14:00 Moscow time, while her colleague Alexander Morozov speaks at a conference at 15:00.
After rising to just above 60.40 at yesterday's open, recently subdued exporters became more active. A USD/RUB far above the CBR daily fix of 59.60 was probably a factor in play. Stabilization of both the dollar and oil prices also helped. OFZs also enjoyed a more supportive day, with the main part of the yield curve tightening by 3-4 bps.
As is usual ahead of a major OPEC summit, speculation over what might or might not be agreed upon is building. Reports suggest that Russia is unconvinced of the need to extend an output cut deal that currently ends in March. An assumption that the deal will be prolonged through the rest of 2018 has underpinned the recent oil price surge, and should serious doubts arise about this, it would hurt oil prices and the ruble.
> Bottom line. USD/RUB should hold near the 60 level today.