Russia FX Beat - September 7, 2017

> Today's focus. Draghi's delicate balancing act.
> Global trigger: ECB day. Attention today will be on the ECB decision (14:45 Moscow time) and press conference (15:30). No change in policy is expected. However, President Draghi has a delicate balancing act in how he handles the unwelcome strength of the euro and the ECB's plans to taper QE.
On the euro, Draghi will be well aware that if he does nothing to talk the currency lower, EUR/USD might rapidly push up above 1.20, complicating the ECB's attempt to get CPI higher. On QE, at its last meeting Draghi said the ECB would start discussions in the autumn on what to do with its EUR60 bln per month QE buying that ends at year end. The ECB wants to start tapering QE to a lower amount but knows such an announcement would spur euro gains. For more, see our ECB preview, "Draghi Backed Into a Corner," published today.
Elsewhere, in the US, Fed Vice Chair Fischer yesterday submitted his resignation for around October 13, adding to concern of a power vacuum at the central bank given uncertainty over Chair Yellen's future. Overnight, President Trump also struck a short-term 3m deal to extend the US debt ceiling until mid-December. In all, in view of important decisions to be taken by the Fed, ECB and the US Congress, event risks in 4Q are building.
> Bottom line. The balance of risk is toward a weaker EUR/USD today. But investors might perceive there to be little firepower behind Draghi's rhetoric and therefore buy into any initial EUR/USD decline toward 1.1850.
> Regional trigger: Oil recovers. USD/RUB held in a relatively narrow 57.25-57.60 range yesterday. Overall, positive sentiment from the temporary US debt ceiling extension and/or generated by Draghi today could help the ruble toward 57 to the USD.
Yesterday, Russian CPI for the week ending September 4 saw the disinflation process continue (-0.1% w-o-w). Next week's data comes just two days prior to the CBR decision and is likely to be supportive of a 50 bps key rate cut, which we forecast.
Oil prices continue to gain, with energy companies working hard to return refineries in the US Gulf to work. WTI has recovered to $49/bbl, very close to its 200d MA. Today, markets will look to weekly US oil inventory data, due at 18:00.
> Bottom line. The 57 level is the obvious target for USD/RUB as oil prices turn higher. However, we doubt the ruble has much mileage to climb from here.