The main event for FX market today was the meeting of the ECB. The 2% rise in the Euro's trade-weighted exchange rate last month is positive news for the ECB, which has attempted to maintain room to maneuver to step up the pace of monetary tightening if necessary. Nevertheless, the course towards tougher policy has become clearer.

The European regulator left the deposit rate unchanged and hinted unequivocally that it was going to raise it in July and September. However, the size of hikes will be 25 bp in each month. Given that inflation accelerated to 8.1% in May, the market considered such intentions insufficient and investors demanded a higher premium for inflation in bonds, which resulted in a sell-off:

The ECB also published forecasts for economic growth and inflation. Compared to the previous meeting, the growth forecast has been cut, while inflation projections have been revised to the upside. The risks of stagflation for the Eurozone, as a result, continue to mount.

Stock markets remain in stabilization mode, the S&P 500 index consolidates in a tight triangle around 4100 in anticipation of tomorrow’s CPI report and an update from the Fed next week:

Oil trades in the red but remains on a rising path as traders try to understand how effective the EU embargo on Russian oil will be, whether Russia will be able to reorient supplies to other markets and how much the global oil supply will decrease. The breakout of the level of $120/bbl in Brent was a technical signal that the rally is gaining momentum.

Today the economic calendar is rather unremarkable, the markets are waiting for the May CPI release tomorrow. The White House has already warned that the number will be high. The consensus forecast assumes that inflation is unchanged in May compared to April at 8.3%, but core inflation, which excludes food and fuel and reflects a key consumer trend, slowed from 6.2% to 5.9%.