Russia FX Beat - November 27, 2017

> Today's focus. Quiet start to a busy week as tax reform news, Fed comments and OPEC summit loom.
> Global trigger: Dollar soft. After a quiet start today, the next few days promise to be very busy.
US monetary and fiscal policy will be in focus more than usual. On Tuesday, incoming Fed Chair Powell will have a confirmation hearing, and outgoing Chair Yellen will testify the following day. A 25 bp rate hike at the upcoming December 13 meeting is fully priced in.
At some time over the course of the week, the Senate may well vote on its tax reform bill. This is expected to happen on Thursday. If passed, the two chambers will set about reconciling their passed bills in a bid to pass a combined package before year end. With time running out, that would be an achievement, likely boosting the dollar.
Important data is also due, with US PCE inflation data and revised 3Q US GDP on Thursday. As mentioned, today is quiet. German Chancellor Merkel is edging toward a new coalition deal with the SDP, her partner in the last government. Overnight, Fed governors Kashkari and Dudley will speak.
> Bottom line. EUR/USD edged up in holiday-thinned markets late last week. Today, we do not think it will reach 1.1950.
> Regional trigger: All eyes on OPEC. The summit of OPEC and its partners starting on Thursday will surely capture markets' attention. It seems that Saudi Arabia and Russia will push to extend output cuts, which currently expire at end 1Q18, through to end 2018. Such an outcome is probably priced in, meaning that Brent might push to $65/bbl on confirmation, but not much higher. An extension for a shorter period could lead oil prices to slip, the ruble following them downward.
EM FX might be fragile at the beginning of the week, following the downgrade of South Africa's sovereign rating late on Friday. S&P cut its foreign currency debt rating to BB from BB+ and also removed its local currency investment grade rating. Almost simultaneously, Moody's, which still rates South Africa at investment grade, put the country on review for downgrade.
> Bottom line. The ruble rebounded strongly last week as oil rose and exporters sold dollars to pay local taxes. We are not so confident that USD/RUB can break its 200d MA near 58.10 this week.