FED: VIEW CHANGE: Deutsche Sees More Front-Loaded Cuts, 2026 Hold
Deutsche Bank analysts see a slightly accelerated pace of Fed rate cuts than they had previously forecast, now expecting back-to-back cuts in the last 3 meetings of the year. After Jackson Hole, Deutsche had pulled forward their next cut expectation to September from December, with 25bp cuts in Dec and March.
- Having effectively moved that March cut forward, they now no longer see any cuts next year: "While we currently do not have additional rate cuts in our forecast for next year, given that our inflation and labor market forecasts are inconsistent with rates below neutral, risks are skewed towards more reductions in 2026."
- They expect the updated Dot Plot to mirror this shift, with a drop in the end-2025 median rate to 3.6% from the 3.9% published in June. We will have more to say about this in Monday's analyst roundup ahead of the Fed meeting, but of the previews we've seen so far suggest a split in opinions between "no change" to the 2025 median dot at 3.9%, and those who see an additional cut added to 3.6%.
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OPTIONS: Larger FX Option Pipeline
- EUR/USD: Aug15 $1.1590-10(E1.3bln); Aug18 $1.1560(E1.1bln); Aug19 $1.1620-25(E1.7bln)
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US: Trump To Make Announcement At Kennedy Center Shortly
US President Donald Trump is shortly due to make an announcement at the Kennedy Center in Washington DC. LIVESTREAM The event will be Trump's public appearance since National Guard troops deployed across DC this morning.
- Trump is expected to announce the first Kennedy Center Honors recipients since he fired Democratic members of the board and took over as chairman in February. He also may speak on other market-relevant issues, with particular market interest in his assessment of a recently concluded call with Ukrainian President Volodymyr Zelenskyy and European leaders.
SECURITY: Call With Trump Made Progress On Ukraine Security Guarantees - Starmer
UK Prime Minister Keir Starmer has stated, ahead of a virtual meeting of the so-called ‘coalition of the willing’ of Ukraine backers, that the group has “military plans ready that could used, if there is a ceasefire [in Ukraine].”
- Starmer’s comments come after an emergency call with US President Donald Trump, Ukrainian President Volodymyr Zelenskyy, European leaders, and security officials this morning, which appears to have delivered some progress on European priorities for Trump’s meeting with Russian President Vladimir Putin on Friday.
- Starmer said, echoing other European leaders' post-call comments, that “talks about ceasefire have to sit alongside credible security guarantee [for Ukraine].” Starmer added that, “we made real progress on security guarantees in call with Trump earlier,” addressing concerns in European capitals that Trump might look to strike an unfavourable deal with Putin that exchanges occupied territory for a ceasefire.
- Starmer continued: “We stand ready to increase pressure on Russian economy through sanctions and other measures as needed”.
- US Treasury Secretary Scott Bessent told Bloomberg TV this morning that sanctions on Russia "can go up" or "can be loosened" depending on the outcome of the Trump-Putin summit.
- Bessent said that European states need to be prepared to join harsher secondary sanctions and tariffs: “It’s put up or shut up time. We put secondary tariffs on the Indians for buying Russian oil. And I could see if things don’t go well, then sanctions or secondary tariffs could go up.”
