Russia FX Beat - September 14, 2017

> Today's focus. US CPI data due as Brent breaches $55/bbl.
> Global trigger: Tax plans. The dollar stayed supported yesterday. It was given further assistance overnight by comments from US Treasury Secretary Mnuchin that US tax reforms will be released "very soon." Recall that an overhaul of taxation was a key element to the "Trump rally" that fueled markets late last year.
The ECB's chief economist, Peter Praet, has said that the Eurozone economy is improving, but that it is "too soon to claim victory on inflation." This is hardly a surprise, as CPI is languishing at 1.3% and the ECB does not expect it to reach the 2% target within the next two years. This also indicates the ECB will extend QE into 2018 when it announces its plans at its next meeting on October 26.
Today, the BoE will announce its rate decision at 14:00 Moscow time. High inflation as a result of GBP weakness led two committee members to vote for a first hike since 2007 at the last meeting. Should there be additional votes for a hike today, we think GBP/USD will surge toward 1.33.
Today's main data event is the US August CPI report at 15:30. Should core inflation hold at 1.7% y-o-y, this could help push up pricing for a rate hike before year-end toward 50% and the dollar higher.
> Bottom line. EUR/USD has fallen this week and we see the risk biased toward a test of 1.1850 today or tomorrow.
> Regional trigger: Brent at $55/bbl. The ruble drifted lower for a second straight day yesterday. The climb in USD/RUB to 58 mirrored the general appreciation enjoyed by the dollar. For the ruble, this was more than sufficient to offset rising oil prices. At $55/bbl, Brent is at its highest level since May.
Data for the week ending September 11 showed inflation unchanged. With CPI down 0.1% so far this month, there is a possibility that full-month inflation will come in below the 0.2% m-o-m recorded in September 2016, which could help the y-o-y rate ease further from the current 3.3%.
Ahead of tomorrow's CBR rate decision, a brokerage poll found that 45 out of 54 traders expect a 50 bp cut to 8.5%.
> Bottom line. Brent is trading at $55/bbl, and this should support the ruble today. USD/RUB could consolidate toward 57.50 ahead of tomorrow's important events in Russia.