Russia FX Beat - October 17, 2017

> Today's focus. Central banks - ECB, Fed, CBR and BoE - in focus.
> Global trigger: ECB headache. Yesterday, Spanish PM Mariano Rajoy extended a deadline to Thursday morning for the president of Catalonia to back down from claiming independence for the region. Although Spain's equity market underperformed in response, falling 0.8%, European markets were relatively unperturbed.
With next week's key ECB meeting approaching, investors will take interest in September Eurozone CPI data today (12:00 Moscow time), expected to be confirmed at an underwhelming 1.5% y-o-y (and 1.1% at the core level).
Ahead of the October 26 ECB meeting, at which the bank is set to announce its QE plans for next year, reports suggest it faces the headache of only being able to purchase EUR200 bln or so of assets in 2018 before exhausting the bonds available for purchase under current rules. If this is the case and a solution cannot be found, this could presage a very dramatic and destabilizing tapering of QE.
> Bottom line. The DXY Index is edging higher. Key resistance this week lies near 93.80, the falling trend line originating from March.
> Regional trigger: Hawkish Yudaeva. Yesterday was a quiet day in the ruble space. USD/RUB fell sharply at the open only to bounce back away from the 57 level back into its prior 57.20-57.40 range. Overall, the dollar was slightly higher yesterday, with the ruble's performance within the parameters of other EM currencies.
Deputy Governor Yudaeva gave what was quite probably the final comments from the CBR prior to its blackout period ahead of next week's rate decision. Yudaeva's remarks were relatively hawkish, saying that the regulator "already sees a shift toward an acceleration in inflation." Unlike prior to recent meetings, Yudaeva steered clear of specific guidance for the upcoming decision, only saying that there is a possibility of cuts over the next two quarters - exactly the same as what the CBR said in the statement to its September 15 rate cut.
The swaps market was almost unmoved in response to Yudaeva's remarks. We expect the CBR to lower its key rate by 25 bps to 8.25% on October 27.
> Bottom line. Brent receded yesterday. A continuation of this trend could see USD/RUB edge toward 57.50.