The ECB disappointed euro bulls on Thursday, as it said it would maintain high level of monetary stimulus in 3Q. It was expected that the ECB will announce that it will soon begin to reduce the use of the main anti-crisis measure - the Pandemic Asset Purchase Program (PEPP), as the economy is no longer in recession. But judging by the clear deadlines in the statement ("until the end of the third quarter"), the policy of the Central Bank becomes more or less certain until the end of the summer. Changes are expected in September, when the ECB will announce monetary policy 2.0 (aka strategic policy review).

Also, yesterday there were data on US inflation. Core inflation jumped to 3.8% in May, beating the forecast (3.4%), with broad inflation reaching 5%. The readings seem to be elevated and constitute a positive surprise, but as we discussed earlier , the low base effect counteracts it. The dollar and long-term bonds reacted to the release as if the chances had increased that the Fed would start phasing out QE ahead of schedule, but subsequent dynamics showed that the initial reaction was too emotional and the inflation report did not change expectations for the Fed's actions:

US 10-Year Treasury Yield

If the Fed does not say anything new at the June 16 meeting (which is most likely), the cheap money policy of the two largest central banks, in fact, will hold out unchanged all summer. At the same time, it is reasonable to believe that the search for carry trade will intensify, primarily in emerging markets. This will also be facilitated by reduced volatility, a key component of investor interest in EM, not only due to the Central Bank's soft credit conditions, but also due to reduced activity in the markets in the summer. In this light, special attention should be paid to USDRUB. The Central Bank is likely to raise rates today, maybe even immediately by 50 bp, at the same time there is an additional downside potential next week, if the Fed does not rush with hints about early policy tightening. Earlier, we also discussed the favorable technical side of the USDRUB short - the breakout of support at 72.65, which has not been possible since last August:

USDRUB technical setup

Two key targets for the summer are the levels of 70.45 and 68 rubles per dollar.