Russia FX Beat - November 20, 2017

> Today's focus. German coalition talks collapse.
> Global trigger: German political drama. Last week the dollar weakened against the euro and yen, reversing a portion of its prior gain. A EUR/USD that was well balanced near 1.18 was hit overnight by news that German Chancellor Merkel has failed to form a new government, with coalition talks having collapsed. This is a surprise development and raises the prospect that new elections might be held or that she will attempt to run a minority government. The situation follows an inconclusive election held in September.
Germany provides huge stability in the eurozone, so the domestic uncertainty will shake investor sentiment. It is to be expected that eurozone assets will therefore underperform near-term. We await further developments.
Elsewhere, this week will be curtailed by the US Thanksgiving holiday on Thursday, which will also render Friday a day of very light trading. Prior to this, there is some noteworthy US news flow. Outgoing Fed Chair Yellen speaks late on Tuesday, and the minutes to the Fed's November 1 decision are released Wednesday. Durable goods orders are also out the same day.
> Bottom line. The euro is likely to be under pressure, with EUR/USD biased toward 1.17. CEE FX should also weaken.
> Regional trigger: Ruble reversal. Global markets were not without their fair share of volatility last week. EM FX participated, and it was the ruble that was hit hardest, at one point down by over 2%, with USD/RUB having punched up through 60 for the first time since August.
However, the second half of the week saw markets stabilize first and then recover, with USD/RUB eventually retracing all the way to 59.20. This marked the highest volatility since July and came amid a Brent price steadfastly above $60/bbl.
US holidays this week will likely curtail ruble activity, but over the course of this week we expect investors to increasingly focus on the upcoming OPEC summit to be held on November 30. Brent prices currently look comfortable above $60/bbl, but we see limited further upside in the near term.
Today at 16:00 Russia releases October unemployment, PPI and retail sales data.
> Bottom line. With major tax deadlines approaching and oil prices supported, a test of 59 for USD/RUB cannot be ruled out.