Russia FX Beat - September 1, 2017

> Today's focus. US jobs report. Ruble's strong outperformance.
> Global trigger: Jobs data. This week's dollar recovery ran out of steam yesterday. Having pressed lower toward 1.18, EUR/USD bounced back up to 1.19. The dollar was generally softer against most currencies, especially the ruble (see below). The trigger looks to have been subdued PCE inflation data.
Attention today is squarely on the August US labor report at 15:30 Moscow time. ADP employment posted an encouraging 237,000 rise, while the Bloomberg consensus sees jobs growth today of 180,000. As has been the case in recent months, the focus will be on whether the wage growth data suggests upward pressure is starting to build. Today also sees ISM manufacturing data at 17:00.
In all, investors are wrestling with a dollar that has arguably fallen in the short term into undervalued territory and a euro that the ECB is desperate to keep from appreciating further. Data from EPFR shows that European stocks saw the biggest weekly outflow ($1.4 bln) since March in the week to August 30.
> Bottom line. Decent jobs data would see EUR/USD back toward 1.1850 today.
> Regional trigger: Ruble threatens trend break-out. The ruble made strong gains again yesterday, taking USD/RUB to 58 for the first time since mid-June. Its 1% rise against the dollar so far this week puts it far in advance of all other floating currencies, with GBP in second place, up by 0.4%.
The acceleration in ruble appreciation yesterday occurred as Brent surged $2/bbl to above $52.50/bbl. Technically, USD/RUB has now broken through some important levels - its 100-day moving average at 58.30 and also 58.35, the 50% retracement from April's low to the July high.
In the rates space, important yesterday was the publication of the August inflation expectations survey. Anticipated inflation fell to a record low, bolstering expectations for a 50 bp cut from the CBR this month. We will wait for the release of August CPI next week before deciding whether to alter our 25 bp rate cut view.
> Bottom line. Heavy inflows into the ruble have taken USD/RUB below 58. A close today beneath important trend support near 57.95 would be significant. Below this, support is seen in the 57.70-57.75 area.