STIR: Fed Rates Shore Up Back-To-Back Cuts Before Quarterly Pace In 1H26

Politico reporting that US President Donald Trump, “promised Arab leaders during a meeting Tuesday that he would not allow Israeli Prime Minister Benjamin Netanyahu to annex the West Bank, according to six people familiar with the discussion.”

• The report appears to refer to a meeting at the UN General Assembly yesterday, where Trump is understood to have presented a group of Arab and Muslim leaders a new US proposal to end the war in Gaza. There haven’t yet been any official readouts.
• The report comes after “Several ministers in Prime Minister Benjamin Netanyahu’s far-right government demanded that Israel annex the occupied West Bank,” in retaliation for the UK, France, Canada, Australia, and others, recognising Palestinian statehood, per FT.
• Politico notes that “despite Trump’s assurance, a ceasefire to end Israel’s nearly two-year war against Hamas was nowhere close to fruition,” according to a source familiar with yesterday’s talks.
• Poliico notes that Arab and Muslim leaders aimed to impress on Trump “that any Israeli incursion into the West Bank would likely lead to the collapse of the Abraham Accords,” Trump's signature first-term foreign policy achievement that he wants to expand to include Saudi Arbia.
• At 17:30 ET 22:30 BST, Secretary of State will hold a press spray ahead of a meeting with his counterparts from Egypt, Saudi Arabia, and the UAE, the three countries likely to backstop post-war Gaza security. Rubio will follow with a separate meeting with counterparts from the Gulf Cooperation Council Member States.

"*US FORMALIZES LOWER AUTO TARIFFS FOR EU EFFECTIVE AUG 1, 2025" - Bloomberg

• Across the session, the greenback has been steadily appreciating, resulting in the USD index rising above last week’s post-Fed recovery highs. The next level for the DXY resides at the 50-day EMA, intersecting today just below the 98.00 mark. Despite a fleeting surge above this average in late July, daily closes above have been rare since February this year. A more lasting break could signal scope for a stronger dollar correction to the topside.
• Bar the outperforming Aussie following higher-than-expected CPI data, losses across the G10 have been broad based, with both the Japanese yen and New Zealand dollar underperforming.
• USDJPY picked up some momentum above 148.38 resistance earlier today, and spot has narrowed the gap to 149.14, the Sep 3 high. Meanwhile, GBPUSD has pierced S-T trendline support, strengthening a bearish threat.
• One chart level that particularly stands out is NZDUSD (shown below), as the pair approaches the key 0.5800 pivot support, which coincides with the 50% retracement of the year’s range. Price action has been exacerbated by the break of a short-term trendline and should we break the figure, 0.5728 and 0.5636 would be the most obvious targets for a deeper selloff.

Source: Bloomberg Finance L.P. / MNI