Russia FX Beat - November 30, 2017

> Today's focus. OPEC+ set to extend cuts to end 2018.
> Global trigger: US tax reform and inflation. G10 FX markets are stable currently. A notable outperformer is the British pound, with GBP/USD heading toward 1.35. This comes as the UK and EU appear to be close to a breakthrough on Brexit negotiations.
Today's focus will be on inflation, with key data coming from both the eurozone and US. Eurozone CPI for November is due at 13:00 Moscow time. Following a sharp rise in German CPI yesterday, the eurozone measure looks set to climb from 1.4% to 1.6-1.7%. In the US, the PCE core deflator for October (16:30 Moscow time) is seen edging up to 1.4% y-o-y from 1.3%. Inflation is well below the 2% target in both the eurozone and US.
Elsewhere in the US, we will follow the progress of a US tax bill through the Senate. A key vote on the bill could occur as soon as today. The possibility of Congress agreeing to a tax reform package before the year end is the main positive dollar risk near-term, more so than the upcoming Fed rate hike.
> Bottom line. GBP/USD could push toward 1.35 today.
> Regional trigger: All about OPEC+. The major focus will no doubt be on the outcome of the OPEC+ summit. OPEC members as well as Russia appear to have settled on a nine-month extension to the current deal, which expires at end 1Q18. This would see the production cuts run to end 2018. We think this is already factored into the current Brent price above $63/bbl.
One potential area of uncertainty is whether OPEC+ will outline an exit strategy, something Russia is reportedly pushing for. Of the key countries involved, Russia is the only one with a floating currency, meaning that it has other considerations. Downside risks for crude prices today include the potential announcement of an exit path or some sort of mid-2018 review of the new plan.
Data yesterday showed CPI in Russia rising 0.1% in the week to November 27. At this point, it looks like CPI will come in at 2.5-2.6% y-o-y in November and hold there until the year end. Although some distance below the 4% target, the CBR has said it would view this as close to 4% and a temporary undershoot. To us, a 25 bp rate cut to 8% on December 15 is still the most likely course of action from the CBR.
> Bottom line. USD/RUB is trapped in a range. Profit taking on long oil positions could push the pair toward 58.8 or higher.