Daily Market Outlook, September 16, 2026

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Missive - Markets Steady As Warsh Faces Fed Hike Test

Global equity markets found temporary footing on Wednesday as investors shifted into a wait-and-see stance ahead of the Federal Reserve’s pivotal interest rate decision. MSCI’s Asia Pacific index rose 0.4%, snapping a four-day losing streak, while US equity-index futures edged up 0.2% and European bourses pointed to a stronger open. The bounce reflected position-squaring rather than structural conviction, with market participants reluctant to extend directional bets before Chair Kevin Warsh’s first major policy tightening test.

Bonds also caught a modest bid after the recent global duration rout. Treasuries edged higher, joined by gains across Australian, Japanese and New Zealand government debt, while European bond futures showed signs of stabilisation. The move followed a sharp selloff driven by the toxic combination of surging energy prices, sticky inflation and rising expectations that central banks will need to tighten policy further into year-end. The US 10-year yield, which touched 5.04% on Tuesday, its highest level in nearly two decades, eased back to 4.99% during Asian hours. Oil offered markets a brief reprieve, though not enough to change the macro picture. Brent slipped 0.7% to around $108/bbl as signs of rising US stockpiles triggered profit-taking after a 20% surge this month. But with crude still trading near elevated levels and Middle East supply risks unresolved, energy remains the key inflation transmission channel for global markets. The pullback in oil may cool the immediate pressure on yields, but it does little to remove the stagflation premium now embedded across the rates curve. Bitcoin remained under pressure near $75,800 after the US Senate rejected a major bill designed to create a clearer regulatory framework for the crypto market. The setback reinforced the sense that crypto remains vulnerable to both regulatory disappointment and tighter financial conditions. More broadly, risk sentiment stabilised, but the market tone was still cautious, with investors waiting for the Fed decision before making a more decisive call on equities, bonds and the Dollar. Markets now assign more than a 90% probability to a Fed rate hike later today, which would mark the central bank’s first increase since 2023. The focus is less on the 25 bps move itself and more on how Warsh frames the path ahead. Policy decisions from the Bank of England and Bank of Japan later this week will add to the significance of the moment, with global monetary policy expectations for the remainder of 2026 likely to be shaped over the next 72 hours.

In the UK, the August CPI kept the Bank of England in a difficult but not yet decisive position. Headline inflation rose 0.2 percentage points to 3.1% year-on-year, in line with market consensus but 0.3 percentage points above the BoE staff forecast from the July Monetary Policy Report. Given last month’s 0.1 percentage point overshoot and the continued rise in energy costs, the July projections were already looking stale. Still, the underlying detail was more reassuring. Core CPI held at 2.6% year-on-year, only 0.1 percentage points above the BoE forecast, while services CPI remained steady at 3.4% year-on-year. That distinction matters for the MPC. The headline overshoot pushes CPI back above 3%, placing the Bank in letter-writing territory to explain the deviation from target, but the absence of clear second-round effects gives policymakers room to avoid overreacting. Food inflation held at 1.3% year-on-year, well below the BoE’s expectation for a rise to 2.0%, while core and services measures continue to suggest that domestic inflation persistence is not yet accelerating in response to the energy shock. There is no room for complacency, however. The pipeline looks less benign than the August CPI print alone suggests. Services PMI price indicators point to the risk that higher energy costs have not disappeared from the inflation process but are simply still working their way through the system. That leaves future MPC decisions highly sensitive to developments in the Middle East and energy markets. For tomorrow’s BoE meeting, however, the relatively calm core and services data should further reduce the already small market expectation of an immediate rate hike.

For the Fed, the challenge is more acute. Warsh used Jackson Hole to reset his early communication missteps with a more cohesive macro framework, making clear that softer summer inflation prints did not convince him underlying trends had meaningfully improved. He also argued that broad financial conditions could not easily be described as restrictive, a hawkish message that took time to filter into pricing but has now been amplified by the renewed oil shock. The market expects the tightening cycle to restart today. The bigger question is how far the Fed needs to go after today. Warsh is still building early-term credibility and must do so while navigating energy shocks, fiscal concerns, sticky inflation, resilient demand and an AI-driven investment boom. Markets already price almost four hikes in the cycle, but the risk is that credibility requires a more forceful signal than investors currently expect. The problem for the Fed is that many of the current inflation drivers are supply-side in nature and therefore sit outside the direct control of monetary policy, while policy lags may be longer than in previous cycles.The bond market selloff adds another layer of complexity. If rising yields reflect doubts about the Fed’s willingness to contain inflation, a hawkish hike and a firm Warsh press conference could stabilise the curve. If the selloff instead reflects growing investor discomfort with fiscal profligacy and long-end supply, monetary tightening will do little to calm the market. In reality, both forces are likely at work, which makes today’s communication challenge especially delicate.

Macro to Micro, markets are stabilising into the Fed, but the setup remains fragile. Oil is still elevated, the US 10-year yield is hovering around 5%, headline UK inflation is back above 3%, and global central banks are being forced to respond to price pressures they cannot fully control. Markets already mostly expect today’s hike, and the Fed only controls the front end of the curve, not the term premium investors demand to lend for 10 years. If oil stays high, inflation risk persists and government borrowing remains heavy, investors may still demand higher yields, pushing the US 10-year even higher. What matters is not just whether the Fed hikes, but whether the bond market believes the move is enough. For traders, the key question is whether Warsh can deliver a hawkish hike without reviving disorderly bond selling or crushing risk appetite. The broader reaction will be clearest in the Dollar, Gold and equities, where investors will quickly signal whether they see the Fed as regaining control or simply chasing a market that has already moved ahead of it.

Overnight Headlines

  • Fed Faces Credibility Test As Markets Brace For A Rate Increase

  • Bond Market’s ‘Extreme’ Short Counts On Fed To Deliver Rate Hike

  • Global Bond Selloff Deepens As 10-Year Yields Hit Multi-Year Highs

  • BoJ Expected To Hike By 25bp To Fresh Three-Decade High

  • Japan’s Export Growth Stays Robust As Shipments To US Lead Gains

  • US-China Discuss Cutting Some Tariffs As Leaders Prepare To Meet

  • Bessent To Meet China's He Lifeng In New York Ahead Of Summit

  • US Pressures Mexico To Box Out China’s AI Hardware Exports

  • US Plans To Provide Thousands Of Massive Weapons To Israel

  • War In Iran Has Cost US $38B Over Five Months, CBO Says

  • Saudi Arabia Reports Wide-Ranging Security Alerts After Week Of Strikes

  • Saudi Coalition Says Houthi Drone Destroyed Near Mecca

  • Shrinking Chinese Fuel Inventories Raise Chance Of Export Curbs

  • Nvidia’s Huang Set To Attend Trump Dinner With Chinese President

  • OpenAI Weighs Funding Round At $1.2T Valuation Ahead Of IPO

  • SK Hynix Strikes Labour Union Deal To Pay Half Of Bonuses In Cash

FX Options Expiries For 10am New York Cut 

(1BLN+ represents larger expiries and is more magnetic when trading within the daily ATR.)

  • USD/JPY: 155.00 ($1.11b), 160.00 ($996.4m), 158.00 ($995.3m)

  • EUR/USD: 1.1400 (EU3.16b), 1.1430 (EU1.18b), 1.1595 (EU1.09b)

  • AUD/USD: 0.7130 (AUD1.01b), 0.7175 (AUD834.6m), 0.7150 (AUD560.8m)

  • USD/CAD: 1.3545 ($565m), 1.3830 ($353.6m), 1.3955 ($310.2m)

  • USD/MXN: 17.31 ($335.1m), 16.75 ($335m)

  • EUR/GBP: 0.8675 (EU498m), 0.8680 (EU400.9m), 0.8560 (EU344.9m)

  • GBP/USD: 1.3800 (GBP304.4m)

  • NZD/US D: 0.5500 (NZD400m)

CFTC Positions as of 11/9/26

  • Equity fund speculators increase S&P 500 CME net short position by 29,085 contracts to 336,643

  • Equity fund managers cut S&P 500 CME net long position by 19,683 contracts to 907,770

  • Speculators trim CBOT US 5-year Treasury futures net short position by 113,020 contracts to 1,267,493

  • Speculators trim CBOT US 10-year Treasury futures net short position by 74,492 contracts to 834,783

  • Speculators increase CBOT US 2-year Treasury futures net short position by 46,589 contracts to 929,107

  • Speculators trim CBOT US UltraBond Treasury futures net short position by 24,171 contracts to 345,140

  • Speculators increase CBOT US Treasury bonds futures net short position by 1,016 contracts to 200,517

  • Bitcoin net long position is 1,524 contracts

  • Swiss franc posts net short position of -29,985 contracts

  • British pound net short position is -58,836 contracts

  • Euro net short position is -42,616 contracts

  • Japanese yen net long position is 10,796 contracts


Technical & Trade Views


SP500 - 7700 weekly bull/bear level

  • Daily VWAP Bearish

  • Weekly VWAP Bearish

  • Above 7700 Target 7800

  • Below 7580 Target 7545

DXY - 99 weekly bull/bear level

  • Daily VWAP Bullish

  • Weekly VWAP Bullish

  • Above 99.20 Target 99.75

  • Below 99 Target 97.50

EURUSD - 1.16 weekly bull/bear level

  • Daily VWAP Bearish

  • Weekly VWAP Bearish

  • Above 1.16 Target 1.1750

  • Below 1.1550 Target 1.15

GBPUSD - 1.3460 weekly  bull/bear level

  • Daily VWAP Bearish

  • Weekly VWAP Bearish

  • Above 1.3460 Target 1.3690

  • Below 1.3430 Target 1.33

USDJPY - 155 weekly bull bear level 

  • Daily VWAP Bullish

  • Weekly VWAP Bearish

  • Above 155 Target 160

  • Below 155 Target 152

XAUUSD - 4510 weekly bull bear level

  • Daily VWAP Bearish

  • Weekly VWAP Bearish

  • Above 4500 Target 4655

  • Below 4500 Target 4100

BTCUSD - 76k weekly bull bear level

  • Daily VWAP Bearish

  • Weekly VWAP Bullish>Bearish

  • Above 76k Target 85k

  • Below 74k Target 66.8k

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