FRANCE: PS' Faure-"No Guarantee We Won't Vote Down Next Gov't"

US President Donald Trump's cryptic first statement on the overnight Russian drone incursion into Polish airspace has offered few clues on the US response. "What’s with Russia violating Poland’s airspace with drones? Here we go!," Trump wrote on Truth Social. 

• In the wake of the post, Polymarket registered a spike (27% to 39%) in the implied probability of Trump imposing new sanctions on Russia, likely inferring an acceleration of Trump's recent pivot away from Russia.
• A White House spokesperson told reporters earlier Trump plans to hold talks with Polish President Karol Nawrocki later today. The call comes after Trump pledged to maintain US military personnel in Poland during a White House meeting with Nawrocki last week.
• The drone incursion will add weight to Kyiv's dual requests for fresh sanctions on Russia and additional military aid. As a coordinated US-EU sanctions package is likely to be bogged down by the need for EU unanimity, a package of military aid from Washington could be a more effective lever for Trump to apply pressure on Russian President Vladimir Putin.
• The most pressing need for Ukraine is additional missile defence systems and interceptors, both of which are under significant supply constraints in Europe and are critical to repelling a sustained Russian aerial bombardment on Ukrainian cities and infrastructure.    
• Capping a frantic day of NATO diplomacy, Polish PM Donald Tusk, Ukrainian President Volodymyr Zelenskyy, French President Emmanuel Macron, NATO Secretary General Mark Rutte, Italian PM Giorgia Meloni, and UK PM Keir Starmer convened for a call a short time ago. 

• US TSY 17W BILL AUCTION: HIGH 3.850%(ALLOT 55.20%)
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• Developments over the summer have done little to push back on Lagarde's relatively hawkish signalling at the July press conference.
• Economic indicators such as the PMIs continue to gradually improve, the unemployment rate is at all-time lows, and inflation remains very close to the 2.0% medium-term target albeit with core still a little above target.
• The main takeaway is one of general resilience amidst trade policy induced uncertainty.