Daily Market Outlook, September 23, 2026

Daily Market Outlook, September 23, 2026

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Missive - Brent Breaking, Bonds Bounce & Bulls Breathe

Asian bonds and Treasury futures caught a bid as oil prices extended their retreat, giving markets another reason to believe the worst of the recent energy shock may be easing. Government bonds in Australia and New Zealand rallied, while the US 10-year Treasury yield hovered around 4.93% after crude moved lower again. The drop in oil is supporting duration sentiment, reducing near-term inflation anxiety and allowing bond markets to stabilise after the recent post-Fed volatility.

Brent crude fell around 1.2% to near $98/bbl, its longest losing streak in a year, as investors responded to signs of potential diplomatic progress between the US and Iran. Trump said US officials had held a “very good” three-hour discussion with Iranian representatives in New York, with further talks expected soon. That follows reports that Iran could reopen the Strait of Hormuz within a week and that Saudi Arabia has signalled it will reopen its East-West pipeline. Together, these developments have sharply improved the short-term energy outlook.

The fall in crude is a significant macro release valve. The recent oil spike had fed directly into inflation expectations, central-bank pricing and long-end yields. Now, with Brent moving back below $100/bbl, markets are testing whether the inflation impulse is beginning to fade. The question is whether the current move is a durable repricing of geopolitical risk or simply a tactical pullback before negotiations hit harder political constraints. For now, however, the direction of travel in energy is bond-friendly.

Equities were steadier rather than euphoric. Asian stocks rose 0.1%, helped by chipmakers after the Nasdaq 100 hit another record high. European futures gained around 0.4%, while US equity futures pointed to more modest gains. The AI and semiconductor theme remains the key support for global risk appetite, with investors still willing to buy into the structural demand story around chips, cloud infrastructure and AI investment. But the broader equity tone is more measured, reflecting the fact that central-bank risk has not disappeared.

The Dollar rose 0.1%, extending gains for a fourth consecutive day, as investors remained focused on Federal Reserve commentary after last week’s hawkish rate hike. Officials continue to warn that inflation remains elevated and may require further tightening, even as lower oil prices ease some immediate pressure. That keeps the Dollar supported by relative rate differentials and the Fed’s inflation-fighting stance, particularly while other central banks are still balancing growth concerns against price risks.

Gold slipped 0.4% to around $4,345/oz as the combination of a firmer Dollar and easing oil-driven inflation fears reduced near-term demand for hedges. That said, bullion remains elevated, supported by lingering geopolitical uncertainty, fiscal concerns and doubts over whether central banks can fully re-anchor inflation expectations without damaging growth. Bitcoin rose more than 1% to around $87,200, helped by the broader risk-on tone and continued appetite for high-beta assets.

The next major political catalyst is the Trump-Xi summit later this week, where trade, Taiwan, artificial intelligence and broader economic issues are expected to dominate. Markets have already begun to price some optimism around US-China talks, particularly following reports of progress on tariffs and AI. That raises the stakes for the meeting. A constructive outcome could extend the rally in semiconductors and export-sensitive Asian equities, while disappointment would risk reversing some of the recent improvement in risk sentiment.

For UK rates, the link between oil and policy expectations remains unusually tight. One defining feature of the Middle East conflict has been the extent to which UK rate pricing has moved almost one-for-one with energy prices. That relationship has been stronger than in either the US or euro area. In the US, the transition to Fed Chair Kevin Warsh and the associated reset in the reaction function has created a separate driver of rate expectations. In the euro area, the ECB’s more proactive tightening has arguably reduced the market’s need to price future moves mechanically off every shift in crude.

The UK is different. The Bank of England is being forced to respond to an energy shock at a time when headline inflation is already back above 3%, fiscal pressures are rising, and domestic activity has proved more resilient than expected. Yet there is an interesting nuance in the latest move: as oil has dipped, UK rate expectations have not fallen as much as the crude move might imply. The most likely explanation is the shift in the Fed’s stance last week. Once the Fed, ECB and BoJ are all responding to the energy shock with tighter policy, it becomes harder for markets to believe the BoE can sit this cycle out.

That matters ahead of the November MPC meeting. Even if oil continues to fall, the BoE will need evidence that lower energy prices are feeding through into inflation expectations, wage-setting and business pricing behaviour before it can fully step back from a tightening bias. The recent MPC minutes already showed several members edging toward the view that policy may need to tighten. Unless Middle East diplomacy produces a material and sustained fall in energy prices, the market is likely to keep some probability of a November hike embedded.

The latest US regional manufacturing surveys underline why central banks remain cautious. September data show that the energy shock is already working its way through industry. The Richmond Fed survey mirrored the weakness seen in the Philadelphia and New York reports, with manufacturing falling to -2 from 4 in August, the weakest reading since February. New orders dropped to -7 from 2, while shipments fell to -6 from 3, pointing to a clear loss of momentum in activity.

The uncomfortable detail is that weaker demand has not yet delivered relief on costs. Richmond’s prices-paid measure rose to 7.08% from 6.22%, showing input price pressures accelerating from already elevated levels. Prices received also rose, but only modestly, to 3.84% from 3.69%. That gap implies margin compression, consistent with softer order books and a more difficult operating environment for manufacturers. Firms are absorbing higher costs rather than fully passing them on, which may protect end-demand for now but risks squeezing profits and future hiring.

Employment in the survey continued to improve, but that resilience may not last if weaker demand and higher input costs persist. The likely path toward lower inflation still runs through softer labour demand and reduced pricing power. In other words, a moderation in inflation may require more visible weakening in employment conditions. That is the policy dilemma for the Fed: inflation pressures remain sticky enough to justify vigilance, but parts of the real economy are already showing signs of strain.

Today’s flash PMIs will therefore be critical. Markets need to know whether the energy shock is producing a stagflationary mix of weaker activity and higher prices, or whether the recent drop in oil is arriving quickly enough to limit the damage. The price components will matter as much as the headline activity readings. If input and output prices remain firm while growth softens, central banks will have little room to turn dovish. If price pressures ease alongside stable activity, the bond rally can extend.

Macro to Micro, falling oil is giving markets the relief they were looking for, but it has not fully changed the central-bank story. Brent below $100/bbl helps bonds, reduces inflation anxiety and supports equities, yet rate expectations remain sticky because the Fed has restarted tightening and other central banks are under pressure to follow. The key question is whether the bond market believes the energy shock is fading fast enough to lower the inflation premium embedded in long-end yields. Watch Brent, the US 10-year, the Dollar, Gold and today’s PMIs. If oil keeps falling and surveys show price pressures cooling, risk can extend higher. But if activity weakens while input costs stay elevated, markets may quickly shift from inflation relief to stagflation concern.

Overnight Headlines

US And Iran Officials Meet In New York To Discuss Ending The War
Witkoff: US Engaged In ‘Lengthy Talks’ With Iranian Delegations At UNGA
Zelensky Says Russia Planning New Mass Attack On Ukraine
Macron Calls On Russia, Ukraine To Halt Strikes On Energy Infrastructure
Trump, Greenland And Denmark Sign Deal In Bid To End Arctic Standoff
Oil Tanker Costs Hit Record $1.2M A Day As Iran War Disrupts Shipping
Oil Traders Bet On Price Drop At Record Pace As Disruptions Ease
Fed’s Barkin: Inflation Not Limited To Energy And Tariff Shocks
Traders Load Up On Hedges For Shallower Fed Rate-Hike Cycle
Asia To Face Sustained Inflation Pressure Into 2027, ADB Warns
Australia Manufacturing PMI Falls Into Contraction In September
S Korea’s Lee, Trump Welcome Progress In US Strategic Investment Projects
China Takes Stock Of Broadcom Gear Amid Domestic AI Drive
Alibaba To Add Data Centres In Europe And Middle East In AI Push
SoftBank Starts Jumbo High-Yield Bond Sale To Finance AI Push

FX Options Expiries For 10am New York Cut

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

EUR/USD: 1.1400 (EU1.84b), 1.1500 (EU1.6b), 1.1600 (EU1.28b)
USD/JPY: 157.00 ($1.23b), 156.00 ($1.21b), 152.00 ($733m)
AUD/USD: 0.7050 (AUD715.9m), 0.7125 (AUD628.6m), 0.7180 (AUD578.4m)
USD/CAD: 1.3655 ($664m), 1.4150 ($380m), 1.4130 ($300m)
USD/CNY: 6.7030 ($1.02b), 6.7102 ($600m), 7.1000 ($507m)
GBP/USD: 1.3626 (GBP557m), 1.3315 (GBP457.3m), 1.3535 (GBP315m)
USD/BRL: 5.2300 ($486.8m), 5.1000 ($419.2m)
EUR/GBP: 0.8550 (EU425m), 0.8625 (EU306.2m)
USD/MXN: 16.95 ($321.8m), 17.07 ($300.6m)
NZD/USD: 0.5960 (NZD333.9m)

CFTC Positions as of 11/9/26

In the latest market updates, equity fund speculators have made notable adjustments to their positions. They've reduced their net short position in the S&P 500 CME by 48,186 contracts, bringing the total down to 288,457. Meanwhile, equity fund managers have also trimmed their net long position in the S&P 500 CME by 8,137 contracts, leaving them with 899,633 contracts.
Turning to the Treasury futures, speculators have significantly cut back their net short positions across various maturities. The net short position for CBOT US 5-year Treasury futures has decreased by 270,127 contracts, now standing at 997,366. The CBOT US 10-year Treasury futures saw a reduction of 13,547 contracts, bringing the total to 821,236, while the CBOT US 2-year Treasury futures experienced a trim of 73,754 contracts, now at 855,353. On a different note, speculators have increased their net short position in CBOT US UltraBond Treasury futures by 63 contracts, totaling 345,203, and added 2,640 contracts to their net short position in CBOT US Treasury bonds, which now sits at 203,157.
In the cryptocurrency realm, Bitcoin has a net long position of 2,468 contracts.
As for currency positions, the Swiss franc is showing a net short position of -28,988 contracts, while the British pound stands at -58,715 contracts in net shorts. The euro has a net short position of -26,993 contracts, whereas the Japanese yen is faring better with a solid net long position of 120,359 contracts.

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