Danske Research discusses its Fed rates trajectory after the July FOMC minutes.

"EUR/USD remained firmly in the 1.1400-1.1450 range yesterday despite the sharp uptick in energy prices. The session was characterized by mixed news headlines regarding the future of peace negotiations with Iran, which remains unclear. Short-end EUR and USD rates have risen largely in tandem, driven primarily by higher inflation expectations. This contrasts with late June, when higher USD real rates supported broad USD FX, while yesterday the DXY index even declined modestly. The stability is also visible in option markets, where 3-month ATM implied volatility rose only very modestly, and remains well below its long-term median level. Risk reversal skews shifted ever so slightly in favour of more expensive USD calls," Danske notes.

"Last night, the minutes from FOMC's June meeting offered no major surprises. The format of the minutes did not receive similar changes as the statement (the document was still 15-pages long vs. 18 pages in April). The minutes offered no clear guidance for or against a July hike, but continued to emphasize uncertainty over future inflation and the importance of incoming data. We continue to forecast 2x25bp hikes from the Fed (current pricing: 45bp), but only later at the December and March meetings," Danske adds.