Russia FX Beat - October 11, 2017

> Today's focus. Spanish PM Rajoy to respond, Fed minutes.
> Global trigger: Rajoy to respond. In a closely followed address, Catalan President Carles Puigdemont did not declare independence for the region. Instead, he said he would allow discussions with the Spanish government over the following "weeks."
This throws the ball into the court of Spanish PM Mariano Rajoy, who has to this point refused such talks. Rajoy holds an emergency meeting with his cabinet today at 10:00 Moscow time and will reportedly address the parliament at 17:30. While, for now, Spanish markets have breathed a sigh of relief, it is far from clear that the constitutional crisis will not return soon.
Outside of Spain, today's focus will be on the Fed. At 21:00, it releases the minutes to its September 20 decision, while dovish Fed voter Charles Evans will speak on policy at 14:15. Overnight, voter Robert Kaplan was cautious on a 4Q hike. He said that the fall in long-term UST yields was a "little ominous" and that an inverted UST curve is not a good idea. In effect, avoiding this is a constraint on how much the Fed can hike rates.
> Bottom line. EUR/USD to hold in a 1.1825-1.1850 range.
> Regional trigger: Ruble resilience. Data yesterday showed Russia recording a $1.2 bln current account surplus in 3Q, better than the consensus for a near $3 bln deficit. Over the first nine months of the year, the surplus stood at $26.6 bln. Monthly data also suggests that the current account improved markedly in September.
With EM FX having come under greater pressure over the last month than arguably at any point this year, Russia's current account surplus provides strong support for the ruble, suggesting that it can remain an outperformer versus EM peers.
That said, the dollar weakened yesterday against almost all currencies except for the Turkish lira. The improved risk sentiment could be reflected in good demand at today's auctions for R30 bln worth of OFZs.
Russia also releases weekly inflation data at 16:00. The weekly CPI gauge has registered flat or negative readings for ten consecutive weeks, lending support to the view that inflation will stay well below the 4% target to the year end. We forecast year-end CPI at 3%.
> Bottom line. USD/RUB is stuck close to 58. Exporter offers together with decent global sentiment should prevent any test of important resistance near 58.30.