Daily Market Outlook, June 17, 2026

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Minute — Oil Slides, Bonds Rally, Warsh on Watch

“The collapse in oil has changed the tone of global markets, supporting bonds and reducing near-term inflation pressure. But it has not produced a clean equity rally because AI valuations remain under scrutiny and central banks are not ready to fully reverse their caution. Today’s Fed meeting is less about the rate decision and more about Warsh’s framework: less guidance, possible emphasis on trimmed-mean inflation, AI/productivity as a structural theme and a longer-term balance-sheet debate. In the UK, softer CPI gives Bailey more room to wait. For markets, lower oil is a relief — but Warsh’s Fed will decide how much of that relief can be converted into easier financial conditions."

Global bonds are rallying as oil continues to fall and investors prepare for Kevin Warsh’s first FOMC meeting as Fed Chair. Brent has dropped below $79/bbl, down around 15% over four sessions, as markets price the US-Iran agreement to reopen the Strait of Hormuz as a meaningful easing of supply risk. Lower oil is helping pull inflation expectations lower and has pushed investors back into duration, with Australian and Japanese 10-year yields down around 5bps and Treasury yields holding near recent lows. Equities are more mixed. S&P 500 futures are up around 0.3% after Tuesday’s tech selloff, but the Nasdaq 100 remains under pressure after falling nearly 2% as semiconductor stocks weakened. Asian equities rose 0.3%, extending gains for a fourth consecutive session, but the tone is less uniformly risk-on than earlier in the week. Lower oil supports growth and reduces inflation risk, but investors are still wrestling with stretched AI valuations and whether the recent rally has run too far, too quickly.The oil move is the central macro development. Brent below $79/bbl is a major shift from the conflict-driven highs and materially reduces the near-term pressure on headline inflation. But the market is still not fully back to the pre-conflict world. The Strait of Hormuz deal lowers tail risk and should eventually improve supply, yet operational normalisation still depends on security verification, insurance repricing and the rebuilding of commercial shipping confidence. For now, the inflation relief is real, but central banks will be cautious about extrapolating too far.

That caution will be on display at today’s Fed meeting. Rates are expected to remain unchanged, so the focus is entirely on Warsh’s communication. As President Trump’s pick, Warsh is widely expected to tilt the Fed in a more dovish direction over time. But his framework is unlikely to be imposed wholesale at the first meeting. The more likely immediate change is stylistic: less forward guidance, less emphasis on precise signalling, and a return to what Warsh has called “back to boring” central banking. That communication shift matters. De-emphasising forward guidance fits both Warsh’s philosophy and the current macro environment. With oil falling sharply but labour and inflation data still firm, the Fed has little incentive to offer a strong directional signal. Warsh may prefer to force markets to price the outlook themselves rather than rely on carefully calibrated Fed language. That could reduce the risk of over-promising, but it may also increase volatility if investors struggle to interpret a deliberately less informative Fed.

Inflation measurement is another area to watch. Warsh has previously suggested the Fed should pay more attention to underlying inflation measures and has expressed a preference for the Dallas Fed trimmed mean over standard core PCE. That is a harder institutional sell than changing the tone of communication. Core measures are deeply embedded in the Fed’s framework, and trimmed mean inflation can be useful but is unlikely to immediately replace conventional metrics. Still, any reference to broader underlying inflation indicators would be a notable signal of where Warsh wants to take the committee.His views on structural forces will also matter, particularly AI. Warsh has argued that AI and productivity gains could be disinflationary over time, but the evidence remains mostly anecdotal. That creates a difficult balancing act. If the Fed puts too much weight on an assumed AI productivity boom, it risks underreacting to current inflation. But if it ignores the possibility entirely, it may overtighten into a structural supply-side improvement. For now, stronger labour data and firm consumption make it hard to lean too heavily on the AI-disinflation story.

The balance sheet is the longer-term issue. Warsh has long favoured reducing the size of the Fed’s balance sheet. Earlier ideas that balance-sheet shrinkage could offset or facilitate lower policy rates now look less central, given financial-stability considerations and likely resistance from parts of the Board. Still, if Warsh hints at a more active approach to quantitative tightening over time, markets could read that as a tightening channel even if the policy rate stays unchanged.The Fed also has a lot of recent data to process. Since May, inflation has firmed and labour-market data have strengthened. That “hot” combination was already complicating the pre-war inflation path before the Iran shock. The sharp fall in oil now helps, but it does not erase the evidence of stronger demand and tighter labour conditions. The Fed can welcome lower energy prices without declaring victory on inflation.

The UK inflation report gives the BoE more immediate relief. Headline CPI held at 2.8% y/y in May, undershooting expectations and coming in well below the BoE’s April MPR forecast of 3.3%. Core CPI rose 0.1ppt to 2.6% y/y, but that was still 0.2ppts below the BoE staff forecast. Services inflation printed at 3.7% y/y versus the BoE’s 3.9% estimate. In other words, the whole inflation profile looks softer than the Bank expected. Food prices were the main source of the downside surprise. Food inflation slowed to 2.2% y/y from 3.0%, well below the 3.5% rate implied by the April MPR. It would be too complacent to dismiss future pass-through entirely, especially with the UN world food price index having turned higher again. But for MPC members looking for early evidence of second-round effects from the energy shock, this CPI report is relatively benign. There are still reasons for BoE hawks to stay cautious. PPI input prices are up 8.7% y/y, showing pipeline cost pressure remains elevated. Pass-through from energy and imported costs can come with long lags. Some of the CPI details also reflect seasonal or timing effects rather than a clean disinflation signal. But the combination of falling wholesale energy prices after the US-Iran deal and downside CPI surprises relative to BoE forecasts clearly strengthens Bailey’s case for holding off on rate hikes.That sets up tomorrow’s BoE decision as a vote-split story rather than a rate-change story. Bank Rate is expected to remain at 3.75%. Pill and Greene are still likely hawkish dissenters, and Mann is a possible third. But the softer CPI data make it harder for the hawks to argue that immediate tightening is required. Bailey’s strategy — tolerate a longer inflation overshoot rather than impose a sharper demand hit — has been given more cover.

In China, the PBoC is signalling a possible evolution in its monetary framework, with greater emphasis on overnight rates and enhanced short-term interest-rate management. Increasing overnight reverse repo operations would bring the PBoC somewhat closer to the operating frameworks used by major global central banks. This is not a dramatic easing signal by itself, but it suggests a desire for more precise liquidity control at a time when domestic demand remains weak and policy transmission is uneven. Japan and Australia remain on a different track from the oil-led duration rally. The BoJ has already raised rates, and Japan continues to stand apart from most developed-market central banks by moving gradually toward tighter policy. The RBA is on hold but retains a tightening bias because of concerns about fuel-price pass-through. Lower oil helps both, but neither central bank is ready to declare the inflation problem solved.

Overnight Headlines

Warsh Set For Debut As Fed Holds Line On Rates
SNB Likely To Hold Rates Ahead Of US-Iran Peace Deal
Bond Options Traders Split On Fed Rate Path As Warsh Era Begins
Bond Rally Fails To Allay Higher-For-Longer Global Rates Threat
Trump’s Iran Deal May Include Potential $300B Reconstruction Fund
Trump Admin Mulls Ways To Boost Oil Tanker Traffic Through Hormuz
Investors Pile Into Bullish $ Bets As ‘US Exceptionalism’ Trade Returns
PBoC: Will Act If Overnight Rates Persistently Deviate From Policy Levels
Japan’s Trade Balance Swings To Deficit As Yen Inflates Imports
Japan Manufacturers' Sentiment Rises On Chip-driven Demand
EU Readies Trade Relief For Armenia Following Russian Import Bans
US Holds Off Blacklisting DeepSeek, Others Deemed Security Risks
OpenAI Burned $3.7B In Q1 While Generating $5.7B In Revenue
Microsoft Weighs DeepSeek Integration For Copilot Cowork
HSBC, Google AI Pact Expected To Deliver Beyond $100M Of Gains
VW Resorts To Sealed Bids To Avoid Conflicts In $10B Engines Sale

FX Options Expiries For 10am New York Cut

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

EUR/USD: 1.1450 (EU974.1m), 1.1500 (EU560.9m), 1.1560 (EU496.2m)
USD/JPY: 158.00 ($1.09b), 157.25 ($749.6m), 158.50 ($691.1m)
AUD/USD: 0.6650 (AUD933.3m), 0.7350 (AUD767.3m), 0.6825 (AUD560m)
GBP/USD: 1.3300 (GBP370m)
USD/CNY : 6.7928 ($1.8b), 6.8500 ($569m), 6.7400 ($400m)
USD/MXN: 17.24 ($629.5m), 17.37 ($546.6m), 17.60 ($471.4m)
USD/BRL: 5.1100 ($767.5m), 5.0800 ($508.7m), 5.0000 ($431m)
NZD/USD: 0.5750 (NZD450m), 0.5800 (NZD405m)

CFTC Positions as of June 12, 2026:

Equity fund speculators have reduced their net short position on the S&P 500 CME by a significant 48,536 contracts, bringing the total down to 437,047. Meanwhile, equity fund managers have also scaled back their net long position in the S&P 500 CME, cutting it by 5,095 contracts to a total of 980,112.
Turning to the Treasury futures, speculators have trimmed their net short position in CBOT US 5-year Treasury futures by 49,056 contracts, now standing at 1,320,162. However, there’s been an uptick in the net short position for CBOT US 10-year Treasury futures, which has increased by 34,232 contracts to reach 863,807. In contrast, the net short position for CBOT US 2-year Treasury futures saw a significant reduction of 130,350 contracts, settling at 1,219,838.
On the other hand, speculators have raised their net short positions in CBOT US UltraBond Treasury futures by 31,021 contracts, now totaling 318,731. Additionally, there’s been a slight increase in the net short position for CBOT US Treasury bonds futures by 3,452 contracts, bringing it to 163,305.
In the cryptocurrency, Bitcoin bulls hold a net long position of 3,018 contracts.
Currencies are experiencing fluctuations in their net positions: the Swiss franc is showing a net short position of -36,665 contracts; the British pound stands at -64,213 contracts; while the euro boasts a net long position of 13,932 contracts. Lastly, the Japanese yen continues to struggle with a net short position of -145,818 contracts.

Technical & Trade Views

SP500

Daily VWAP Bullish
Weekly VWAP Bearish
Above 7570 Target 7700
Below 7480 Target 7395

DXY

Daily VWAP Bearish
Weekly VWAP Bullish
Above 99.20 Target 100.30
Below 99 Target 98.40

EURUSD

Daily VWAP Bullish
Weekly VWAP Bearish
Above 1.17 Target 1.1780
Below 1.1650 Target 1.1450

GBPUSD

Daily VWAP Bullish
Weekly VWAP Bullish
Above 1.35 Target 1.3580
Below 1.35 Target 1.3150

USDJPY

Daily VWAP Bearish
Weekly VWAP Bullish
Above 159.30 Target 162.20
Below 159Target 157.95

XAUUSD

Daily VWAP Bullish
Weekly VWAP Bearish
Above 4200 Target 4500
Below 4150 Target 3569

BTCUSD

Daily VWAP Bullish
Weekly VWAP Bearish
Above 67.2k Target 70.5k
Below 60.5k Target 52.2k