Deutsche Bank warns of potential market turbulence around August 1 - 3 key flashpoints

Deutsche Bank is sounding the alarm on a potentially volatile start to August, warning that a confluence of risks could reignite recession fears and trigger sharp market moves — much like the turmoil seen during the same period last year.

In a note to clients, the bank pointed to three key flashpoints converging around August 1:

1. the looming tariff deadline,
2. the release of the U.S. jobs report,
3. and elevated long-end bond yields.

Each, Deutsche says, could individually rattle markets — but together, they pose a “seriously problematic” setup for risk assets.

• Last year, the late-July/early-August period set the stage for the worst market turmoil of 2024
• This year, that week looks seriously problematic again from a market perspective

Tariff Deadline Looms

• The first risk is the pending August 1 deadline for a new round of U.S. tariffs. Deutsche Bank notes that markets appear complacent, with little priced in for the possibility of higher tariffs. If a sharp policy shift materialises at the eleventh hour, it could catch investors off guard and spark a surge in volatility.

Jobs Report Adds to Jitters

• Compounding the risk is the U.S. non-farm payrolls report, also due on August 1. Deutsche cautions that even a modest downside surprise — especially against a backdrop of nervous sentiment — could trigger outsized market reactions. Last year demonstrated that even a small miss can cause a big selloff if investors are already jittery, the note said.

Yields in a Vulnerable Spot

• Adding to the tension is the fact that long-term Treasury yields are already at elevated levels. This leaves little room for a further rise before concerns over U.S. fiscal sustainability begin to resurface. It would take less of a jump before we move into problematic territory that re-ignites fears around fiscal policy Deutsche wrote.

Recession Fears Could Resurface

• Deutsche warns that if tariffs do rise and the jobs report disappoints, the market narrative could suddenly shift in a more negative direction, potentially reviving fears of a U.S. recession. With investor sentiment already fragile, the combination of policy uncertainty and soft economic data could serve as a potent catalyst for renewed market stress.

This article was written by Eamonn Sheridan at www.forexlive.com.

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