The Russian ruble returned to a decline. The currency lost significant support due to the end of the tax period when exporters are expected to sell part of the forex earnings to the domestic market.

The weakening of ruble is takes place in the wake of recovering oil prices. This confirms the theory that the main driver of its strengthening last year and early this year was the attraction of federal loan bonds to Russian debt markets. The big gap in the interest rates of the Central Bank of Russia and the world's largest banks, as well as the actual artificial lowering of inflation, is largely due to the growth of the national economy. This bolstered the ruble in terms of currency liquidity and contributed to the demand for OFZ.

But as they say it, everything flows and everything changes. The Fed raised interest rates in June by 0.25% while the Central Bank of Russia, in contrast, dropped by the same amount. On the other hand, oil prices fell below the comfort level of $50 per barrel of Brent. The new US sanctions together with the decline in CBR's rate cut yields scared foreign speculators.

Russia's Ministry of Finance data on the placement of OFZ in the second quarter clearly point to a decline in demand for debt securities. It was not able to implement the full loan plan of 500 billion rubles as it only managed to attract 400 billion rubles. Today, another attempt will be made to sell OFZs for 35 billion rubles. And even if we assume that this will be successful, and we have doubts about this, the full loan plan will still not be reached. In other words, the dynamics of demand for government securities clearly show a loss of interest especially in the sector of foreign speculators for carry trade.

In our opinion, this process will continue and significantly strengthen if the US sanctions prohibit the sale of Russian debt securities to US investors. This will be a serious blow to the budget if the Russian Federation which at the moment is supported largely by public debt strategies. This means that they may need to create "hot-house" conditions for carry trade against the background of attractive OFZs.

If this happens, Russian authorities will again return to the "cheap ruble" strategy which will lead to the resumption of inflation and the depreciation of the national currency.

Forecast of the day:

The EURUSD pair is trading below 1.1355 in a wave of optimism regarding the prospects of ECB stimulus reduction that is anticipated to be announced in September. On this wave, if the pair breaks 1.1355, it may rise to 1.1400 or even 1.1425. However, we believe that it should start selling for growth not only because of strong overbought market and strong local resistance levels but also because of the pending inflation data for the euro area which may show a decline. Based on this, we can assume that the pair may fall to 1.1270.

The USDJPY pair traded above 112.00 and may continue to rise until 113.00, if not only to consolidate above this level. It will also be supported by the positive US employment data which will be released next week.