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Bitcoin & stocks slide, Dollar & yields gain ahead of FOMC
Updated Updated Wed, 2026 September 16 08:26
- US, Israeli and Arab military chiefs held secret meeting on Iran
- US Senate blocks landmark Crypto bill in industry loss
- Fed faces credibility test as markets brace for a rate increase
- 10-year Treasury yield hits highest level since 2007, boosts dollar
FX Analysis
USD rose for a fourth straight day as Fed rate hike expectations increase further. A 25bps rate rise today is now virtually fully priced in as Treasury yields advanced higher. We wrote recently that the dollar’s quiet response to several drivers like high oil and weak risk sentiment had left us head scratching. That said, we are now only back to late August levels with the early September top at 99.86 the next near-term bull target. See more below for FOMC coverage.
EUR outperformed its peers and again tapped the 50-day SMA at 1.1539 before retracing some of its losses. German investor morale continued to rise in September but printed less than expected. Hawkish comments from ECB officials appear to be underpinning support for the single currency. Moulin said the inflation outlook justified the recent rate hike. But support will be put to the test today, if we get a ‘hawkish hike’ from the Fed. Strong support sits around 1.15
GBP was mid-pack among its peers, after cable initially dipped to a 5-week low at 1.3464. But buyers stepped in, even after a relatively soft labour market report. Private sector payrolls fell, which is consistent with major hiring surveys. Crucially, wage growth was weak at 2.9% and tallies with the medium-term inflation target of 2%. With public sector pay growth unlikely to top this year’s 4.1% increase, does more than 100bps of rate hikes currently priced in by money markets over the next 12 months potentially look too much? Focus turn to today’s CPI ahead of Thursday’s BoE meeting.
JPY underperformed again as the major pushed up to one-week highs. Clearly, the FOMC meeting and broader market tone will be key drivers over the next 24 hours. That comes before the BoJ rate decision and Ueda press conference. Guidance from the Governor will be key, with one more rate hike almost fully priced before year end. There were mixed reports about government plans to boost defence spending to 3.5% of GDP, versus the current 1.9%.
Stock Market Analysis
US stocks: The S&P 500 lost 0.45% to close at 7,585. The Nasdaq closed down 0.78% at 28,938. The Dow Jones settled lower by 0.63% at 5`2093. Sectors were predominantly lower, with weakness led by Consumer Discretionary, Utilities and Consumer Staples. Energy was the big outperformer as crude prices rallied, with Materials the other sector in the green. AI developments continued to linger over stocks with mixed performance among the chip and memory names. Nvidia and Marvell closed in the green whereas Sandisk, Intel and Micron were lower. Cybersecurity stocks like CrowdStrike continued to march north adding 3% and more record highs, with Fortinet and Palo Alto also gaining amid sector outperformance.
Asian Stocks: Futures are mixed. APAC stocks traded mostly lower with tech leading the downside and mixed China activity data. The ASX 200 underperformed on weakness in mining, materials and financials. The Nikkei 225 saw two-way price action with Kioxia dominating the headlines on a potential US listing next year. The Hang Seng and Shanghai Comp were muted as retail sales and fixed asset investment disappointed while industrial production beat estimates.
Gold Analysis
Gold printed a small inside day and doji as markets await today’s FOMC meeting. The 50-day SMA offered support again at $4,295. If we lose this on a hawkish Fed statement or press conference, next big support is just below $4,100 and then around $4,000.
Day Ahead – UK CPI, FOMC Meeting
UK headline CPI is expected to rise two-tenths to 3.1% in August, driven by higher fuel prices, while the all-important services inflation increases a tenth to 3.5%. Core is expected to remain steady at 2.6%. Together with last week’s resilient GDP report, this will likely not be sufficient to justify a September hike at Thursday’s BoE meeting. The MPC is expected to keep rates unchanged at 3.75% in a 6-3 vote split, matching July’s vote. Despite higher energy prices, tighter financial conditions and limited signs of second-round effects give policymakers scope to wait for a bit longer. The key question is for how much longer, with energy prices now closer to the July MPR’s adverse scenario in the near term.
The Fed is virtually fully priced to hike rates by 25bps, with money markets giving it a 93% chance. From a one in three bet a month ago, bond markets have moved sharply in recent days and weeks as hotter than expected jobs and inflation data have moved the policy dial. We get fresh quarterly economic projections and a dot plot, though whether Chair Warsh gives his forecasts is not known. His distaste for forward guidance is the issue here, though the recent ramping up in Treasury yields probably means he might make some effort to characterise how much work the FOMC might need to do to return policy to an appropriate setting. After all, inflation has overshot for more than five years, and that persistence is expected to continue.
Chart of the Day – Dollar Index nears resistance
With a hike today pretty much a done deal, it is the pricing further out that is crucial for market direction. There are more than 90bps of Fed tightening between now and next summer so any doubts about follow through action from the FOMC could derail the greenback. A ‘hawkish hike’ with Warsh wary about inflation and/or officials wanting cementing prices should see the Dollar Index move above the 100-day SMA at 99.80 towards the 50-day at 99.94. Initial support is the major Fib level (38.2%) of this year’s high to low move at 99.41, with the 200-day SMA below at 99.14. Bears will eye that well-watched marker and the midpoint of the 2026 move at 98.67. That tallies with strong support from August and last week’s lows.
