Russia FX Beat - October 20, 2017

> Today's focus. US tax progress. Yellen speaks late tonight.
> Global trigger: Tax progress. UST yields and the dollar are trading higher after the US Senate passed a budget resolution bill. This is only the first step toward the adoption of President Trump's tax reform bill. Yet, after months of frustration, it is a step forward, and one that will rekindle thoughts of the reflation trade that was so powerful late last year.
Overnight reports suggest that President Trump's advisors have recommended he select either Jerome Powell or John Taylor as the new Fed chair. Powell is already a member of the Fed, while Taylor is considered more likely to usher in change and possibly tighter monetary policy. In an otherwise quiet day, current Fed Chair Yellen speaks late tonight (2:30 Moscow time) on the topic of monetary policy.
Despite the market's current relaxed state, attention will stay on Spain over the weekend. A Spanish government clampdown on Catalonia's autonomy is to begin, and the region may declare independence early next week. A separatist campaign group has called on Catalans to pull money out of banks including Banco Sabodell and CaixaBank today. The crisis in Spain adds an extra twist to the critical ECB policy meeting next week.
> Bottom line. Progress on US tax reform is a tailwind for the dollar today, with 93.70 a target for the DXY. Risks relating to Spain over the weekend warn against long euro positions.
> Regional trigger: External redemptions. In comments yesterday, senior CBR official Igor Dmitriev reiterated that the central bank does not see the current 3% level of CPI as a material deviation from its 4% target. The current slump is instead viewed as temporary. CBR remarks in recent days have teed up markets for a 25 bp cut in exactly a week's time from now.
According to the CBR's updated statistics, external debt redemptions of non-financial companies in 4Q17 and 1Q18 amount to $25 bln and $28.6 bln, with the bulk of payments due in December and January. Of this, excluding intragroup financing, actual repayments may reach $23.5 bln and $15.9 bln, respectively. As for the rest, we believe it will also be refinanced more or less in full given that sanctioned companies' redemptions do not exceed $1 bln per quarter, while other companies will likely issue Eurobonds to repay their debt.
> Bottom line. USD/RUB is trapped in a range. Independent dollar gains may prevent a test of support near 57.15-57.20.