Russia FX Beat - November 21, 2017

> Today's focus. Yellen speaks tonight as German elections loom.
> Global trigger: German political risk. Fed Chair Yellen yesterday announced that she will step down from the Fed board altogether when Jerome Powell takes charge. This is not surprising, but President Trump now has four seats on the board to fill, meaning that the orientation of the Fed might well change on a medium-term horizon.
On an otherwise quiet day, attention will be on an event that Yellen will participate in overnight (starting at 2:00 Moscow time). The event will reportedly include a Q&A, which would provide an opportunity for Yellen to lay out her thoughts regarding next month's Fed decision, for which markets are fully pricing in a 25 bp hike to 1.50%.
Despite considerable intraday volatility, the euro was yesterday resilient in the face of political concern in Germany. The collapse of coalition talks has raised the possibility of either new elections or a minority government. Chancellor Merkel has indicated her preference for the former. Germany has been a source of political stability during the eurozone's recent travails, and the risk that this might change would be euro-negative, in our view.
> Bottom line. Our preference is for EUR/USD to edge lower toward 1.17.
> Regional trigger: Losses in Turkish lira set the tone. Exporters were rather active yesterday in Russia, which supported the ruble. Yet a soft EM FX backdrop forced USD/RUB higher.
Losses in the Turkish lira are setting the tone. This morning, USD/TRY reached a new record high of 3.98. Lira weakness has pushed the TRY/RUB cross rate back to key long-term support at 15. If this is to hold, and if USD/TRY is to break 4.00, then USD/RUB will head back toward 60.
Speculative positioning for the week up until last Tuesday showed investors reducing a net long ruble position for the first time since August. The reduction was not significant in size but does highlight the pressure the ruble was under early last week, when USD/RUB pushed above 60. The situation has since calmed, and we certainly do not expect positive sentiment toward the ruble to collapse.
President Putin is to speak today with Syrian President al-Assad and afterward with US President Trump.
> Bottom line. USD/RUB is biased toward 59.50 today.