Daily Market Outlook, September 21, 2026

Daily Market Outlook, September 21, 2026

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Missive - Risk Firms As Oil Falls And US-China Hopes Build

Asian equity markets began the week on a firmer footing, with many regional indices posting gains despite a still-heavy geopolitical backdrop. The improved tone was helped by another move lower in energy prices, with Brent crude down around 1.75% versus Friday’s close at approximately $101.70/bbl. US Treasuries were closed due to a Japanese holiday, removing one of the key real-time cross-asset signals, but the broader market mood was modestly more constructive as investors focused on signs of easing trade and energy pressures.

The risk rally is notable because it comes despite renewed uncertainty around the US-Iran conflict, an escalation in fighting between the Houthis and Saudi Arabia, and continued warnings over European security risks and potential hybrid attacks from Russia following recent elections. For now, markets appear willing to look through the geopolitical noise and instead price two more supportive developments: progress in US-China talks ahead of this week’s Trump-Xi meeting, and signs that oil and gas shipments through the Strait of Hormuz are improving under US naval protection.

The energy angle remains central. News from the US military that shipments through Hormuz are picking up helped dampen wholesale energy prices, giving investors some relief after the recent oil spike. Brent near $101.70/bbl is still historically elevated and remains a risk for inflation expectations, but the direction of travel matters. A continued decline would ease pressure on central banks, reduce the risk of further long-end yield volatility, and give equities more room to extend the relief rally. Conversely, any renewed disruption in the Gulf would quickly put inflation and term premia back at the centre of the tape.

The other supportive impulse comes from US-China diplomacy. Reports that talks have made progress on tariffs and AI ahead of the Trump-Xi meeting later this week are helping sentiment, particularly across Asia’s technology and export-sensitive markets. After recent concerns around AI regulation, semiconductor valuations and trade restrictions, even modest signs of détente are enough to support positioning. Investors are not yet pricing a comprehensive reset, but they are responding to the possibility that the trade and technology backdrop may become less hostile at the margin.

In Japan, the Yen remains in focus after the Bank of Japan conducted a rate check late on Friday, helping pull USDJPY back from near 158 to around 157. The move suggests official discomfort with the speed and scale of Yen weakness, even after last week’s BoJ rate hike. The broader problem remains that Japanese policy tightening is still being overshadowed by elevated US yields and the Fed’s renewed hawkish stance. A rate check may slow the move, but unless the Dollar softens or the BoJ signals a more aggressive path, Yen depreciation pressure is unlikely to disappear fully.

European political risk is also back on the radar. In Germany, the CDU suffered another poor set of state election results, with its 4.9% vote share in Mecklenburg-Vorpommern falling below the threshold required to secure seats in the regional parliament. The result increases uncertainty around Chancellor Merz’s future, with prediction markets now assigning a 27% probability that he steps down before year-end, up sharply from 12% at the start of the month. This matters for markets because Germany is already dealing with weak growth, fiscal constraints and elevated security risks; fresh political instability would further complicate the policy response.

Although last week delivered the major central-bank decisions, developed-market policy risk has not disappeared. The Norges Bank meeting on Thursday is the most likely source of rate action, with markets assigning a little over a 50% probability to a hike from the current 4.25% base rate. That pricing may be conservative given persistent inflation, a generally solid domestic economy and the risk that pipeline price pressures pass through into already sticky underlying inflation. Recent hikes from the ECB, Fed and BoJ may also give Norges Bank additional cover to tighten.

The SNB and Riksbank are also due on Thursday, but both are expected to hold rates steady, at zero and 1.75% respectively. Communication will still matter, particularly any shift in risk assessments. However, inflation remains low in both economies, reducing the urgency to move. In Switzerland’s case, the SNB is also likely to view relative monetary conditions as helpful given the still-rich exchange rate, meaning there is little incentive to tighten unless inflation dynamics change more decisively.

This is also flash PMI week for the major economies, with Wednesday’s releases providing the first broad read on how the latest oil spike is feeding through into activity, confidence and price indicators. These surveys will be especially important because central banks are now trying to distinguish between a temporary energy shock and the emergence of second-round inflation effects. Strong price components alongside resilient activity would reinforce the case for further tightening; weaker activity with easing prices would support the view that the oil shock is starting to bite without broadening.

The UK calendar is lighter but still relevant. Public finance data and the CBI industrial trends survey are due Tuesday, followed by the CBI retail survey on Thursday. After last week’s hawkish Bank of England messaging and firmer retail sales data, investors will be looking for signs that domestic momentum is holding up despite the energy shock. Any evidence of stronger activity or sticky price pressures would further support expectations for a possible November hike.

In the Eurozone, the week begins with consumer confidence on Tuesday, followed later by the German IFO survey, the ECB Economic Bulletin on Thursday and Eurozone money and credit data on Friday. The IFO release will be particularly important given Germany’s combination of weak growth, political uncertainty and exposure to both energy and trade shocks. The US calendar is more second tier, with regional Fed manufacturing surveys from Chicago, Richmond and Kansas City, alongside Q2 current account data, new home sales, building permits, preliminary durable goods orders and shipments, and final Michigan sentiment.

Politically, the two dominant events are the UN General Assembly, running throughout the week, and the Trump-Xi meeting on Thursday. The UN gathering will keep geopolitical risks in focus, from the Middle East to European security, while the Trump-Xi meeting is the major potential catalyst for trade, AI and supply-chain sentiment. Markets have started the week pricing some optimism, which means the bar for disappointment is now higher.

Central bank speakers will also help shape the post-meeting narrative. From the Bank of England, Dhingra, Breeden and Lombardelli are scheduled to speak at the Imperial College macro policy forum on Thursday, while Lombardelli will also discuss macro policy in Poland. The ECB lineup includes Zigman and Lane on Wednesday, plus Vujcic on Wednesday and Friday. From the Fed, Goolsbee speaks Monday, Williams appears Tuesday, Thursday and Friday, while Paulson and Hammack are scheduled later in the week. Investors will be watching whether officials validate the recent tightening repricing or push back against it.

Macro to Micro, the market enters the week with a better tone, but the foundations of the rally remain fragile. Lower oil, progress in US-China talks and improved Hormuz flows are giving risk assets some breathing space, yet geopolitical risk, elevated inflation uncertainty and heavy government borrowing remain in place. With Treasuries closed in Asia, the real test will come when the US long end reopens and investors decide whether Brent near $101 is enough to ease inflation fears. If oil keeps falling and US-China headlines remain constructive, equities can extend the rebound and the Dollar may consolidate. But if geopolitical risk reasserts itself or the 10-year yield moves higher again, the relief rally could quickly lose momentum. This week, watch oil, USDJPY, the US 10-year, flash PMIs and the Trump-Xi meeting: together they will determine whether markets are seeing genuine macro relief or just a pause in a still-hostile inflation and rates regime.

Overnight Headlines

• Oil Hits Over 1-week Low On Hopes Of Boost To Diplomacy In Iran War

• Houthis Launch Missile At Saudi Capital In Escalation Of Hostilities

• Iran Warns Against New Escalation By US And Its Allies

• Ukraine’s Zelenskyy Will Meet Trump During UN Events In New York

• Russia Moves To Expand Drone Factory In Tatarstan

• Bessent Hails ‘Very Successful’ China Talks On AI Threats And Trade

• Trump-Xi Talks Could Mean $6B Of US Natural Gas For China

• China’s Selective Crop Buying Tests US Trade Truce Before Summit

• China Keeps Loan Prime Rates Unchanged For 16th Month

• Fed’s Kashkari Says Inflation Is Still Too High Across US Economy

• Record Global Debt Requires Urgent Fiscal Action, IMF Chief Says

• French Finance Ministry Expects Record Debt In 2026, Near 120% Of GDP

• Merz Vows To Stay On After Worst-Ever German State Result

• US Diesel Tops $6.50 A Gallon As Wars Worsen Global Fuels Crunch

• SoftBank Seeks Over $11B In Junk Bond Deal For OpenAI Bet

• Microsoft’s Nadella To Join OpenAI And Nvidia CEOs At Trump-Xi Meal

FX Options Expiries For 10am New York Cut 

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

• EUR/USD: 1.1470 (EU1.16b), 1.1350 (EU881.9m), 1.1175 (EU577.8m)

• USD/JPY: 157.00 ($2.24b), 154.00 ($1.29b), 155.50 ($870.6m)

• AUD/USD: 0.6650 (AUD604m)

• USD/CAD: 1.3715 ($347m), 1.4000 ($300m)

• USD/BRL: 5.7820 ($524.1m), 4.8530 ($521m), 5.1500 ($396.7m)

• USD/MXN: 17.00 ($661.8m), 16.50 ($480m)

• EUR/GBP: 0.8550 (EU331.5m)

• NZD/USD: 0.5950 (NZD383.2m), 0.5700 (NZD304.6m)

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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