Russia FX Beat - November 8, 2017

> Today's focus. USD/RUB to make a push for 60?
> Global trigger: Trump on tour. The dollar held strong yesterday, with the DXY close to a four-month high. For this index, a break above 95.15 would be a bullish signal, while EUR/USD is primed to push below 1.16.
With a December 13 Fed hike almost fully priced in, the prospects for major US tax reform are a key ingredient for the dollar's performance in coming weeks. The currency could move lower on a report overnight from the Washington Post that the Senate is considering a one-year delay to cutting the US corporate tax rate, a critical component of the new tax proposal.
Today is set to be relatively quiet, at least on the macro front. President Trump continues his tour of Asia and has arrived in China, where he will meet with President Xi. So far, Trump has been guarded in comments regarding North Korea, while, to our surprise, there has been relative silence so far from the latter.
> Bottom line. EUR/USD is biased toward 1.1550, in our view. Also worth monitoring is the British pound as pressure mounts on an already fragile UK government. GBP/USD could easily push back below 1.31 this week and toward 1.30 near-term.
> Regional trigger: 50 bp cut back on the table? Russian CPI data for October showed a sharper than expected decline in inflation, from 3.0% to just 2.7% y-o-y, a new record low. With November also shaping up to be benign, our economists now see year-end inflation at just 2.6%, with risks skewed to the downside. Clearly, this makes the CBR's December 15 decision more interesting, as a 50 bp rate cut may be back on the table. Prior to the meeting, we will see November CPI data and an also crucial inflation expectations report.
The level of the ruble is also important. If USD/RUB is well above 60 come December 15, a deeper rate cut becomes less likely. Yesterday, USD/RUB pushed toward 59.50, close to our end 4Q target of 60. For now, the dollar's momentum is overpowering that of oil prices, pushing the correlation of the likes of the ruble and Norwegian krone to oil prices to close to zero.
> Bottom line. USD/RUB is moving in line with the broad dollar story, not oil prices. The conversion of a portion of $600 mln of interim dividends from Norilsk Nickel may also be contributing to the move. USD/RUB should hold above 59 ahead of weekly EIA oil inventory data from the US at 18:30 Moscow time.