Russia FX Beat - October 31, 2017

> Today's focus. US investigation detracts from Fed and tax news.
> Global trigger: Politics versus economics. Reports indicate that President Trump will announce his nomination for Fed chair on Thursday. Current governor Jerome Powell is the strong favorite, and confirmation of his selection would likely nudge the dollar lower and help risk sentiment. For more on this and tomorrow's US rate decision, please see our preview, "No Change, But New Chair," published yesterday.
This week's Fed-related news flow is being overshadowed by the first charges in the special investigation into the Trump campaign's alleged ties to Russia. Outside of the wider, long-term repercussions, this risks denting momentum for near-term progress on Trump's policy agenda, most critically tax reform.
US yields edged lower yesterday due to the talk surrounding Powell, tax reform concern and a report that a proposed 15 pp corporate tax cut might be phased in over five years (fuller details are due for release tomorrow).
The above-mentioned issues will likely dominate today. Data-wise, the focus is on eurozone 3Q GDP and October CPI (13:00 Moscow time). The US sees consumer confidence at 17:00.
> Bottom line. EUR/USD to hold in a 1.1600-1.1650 range.
> Regional trigger: Oil above $60/bbl. With the Russia 5y CDS at a multi-year low of 127 bps and USD/RUB's dip back below 58 yesterday, Russian assets are so far unaffected by the developments in the US investigation into Trump's election campaign. We expect this to remain the case.
At its current 58, USD/RUB is finely balanced, just below resistance at its 200-day moving average of 58.15, but just above important trend support near 57.70.
The big question now is how long the ruble can ignore Brent's surge above $60/bbl for the first time since July 2015. At a minimum, we can say that the downside risks for the ruble are curtailed. However, we would note that an OPEC+ extension of output cuts is almost fully priced in, while USD/RUB-Brent correlation is at an all-time ruble post-float low of -0.05.
It is a quiet week for scheduled Russian economic data. October inflation expectations data is due for release any day starting from tomorrow, while October CPI will be released next week.
> Bottom line. A Brent move to $61/bbl would keep USD/RUB near 58.00.