The reasons that kept the Fed put in September and October have now largely dissipated Lower US growth Tighter financial conditions Lower global growth Dollar strength Lower commodity prices Remaining slack in labour market 4 -- Lower US inflation Deutsche Bank Ahead of September / October FOMCs • Hike not priced by market — risk of financial tightening (stronger dollar, higher rates) • High financial markets volatility • Fears of sharp slowdown in China • Concerns over US and eurozone growth, despite solid macro data • Concern given 20% rise since mid-2014 • Rate hike would have led to further strength • Sharp sell-off in commodities since May2015, including nearly 30% drop in oil • Worry that it reflects global growth weakness • Some slowdown in labour market • Little evidence of wage inflation Current conditions • Market almost fully pricing a hike • Volatility has abated • Buy into stabilisation and gradual, not sharp, slowdown in China • Less concern about downside risks in US and eurozone • Further strength but largely driven by hike expectations • Less a concern following ECBdriven euro rally* • Weakness continues — though less tied to global growth concerns • Strong rebound in labour market and pick-up in wage inflation — confirming diminishing slack NOW ECB delivered less than market expectations on 3-December. leading to a 2%+ surge in the euro vs the dollar ✓ Largely dissipated -- Partly dissipated X Still a concern 3 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) CONFIDENTIAL DB-SDNY-0119250 SDNY_GM_00265434 EFTA01459041