Daily Market Outlook, June 18, 2026

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Minute — Markets cheer the Trump-Iran deal. The New Man at the Fed isn't joining the party.

Lower oil is doing the heavy lifting — boosting equities, dampening the immediate inflationary impulse. But Warsh's first FOMC meeting left traders uncertain, and a hawkish shift in the dots has all but ruled out imminent easing. For the BoE, today's hold is well-supported: inflation is softening, oil is cheaper, and wage growth is fading. The harder question is what happens next — with a hawkish Fed, a vulnerable pound, and global central banks in no mood to blink, Bailey’s patience may not survive the squeeze.

Risk appetite has returned after President Trump signed an interim agreement aimed at resolving the Iran conflict and reopening the Strait of Hormuz. US equity futures are higher, with S&P 500 futures up as much as 0.9% and Nasdaq 100 futures gaining around 1.5%, led by technology stocks. Asian equities have risen for a fifth consecutive session, again with regional tech shares at the front of the move. The rally comes despite a hawkish market reaction to Kevin Warsh’s first FOMC meeting as Fed Chair. That tells us the immediate relief from lower oil and reduced geopolitical tail risk is still powerful enough to offset tighter rate expectations, at least in equities. After Wednesday’s Fed-driven dip, investors are again leaning into the idea that a reopening of Hormuz can lower inflation pressure, support consumption and reduce the threat of a more damaging energy shock. Oil is doing the heavy lifting. Brent has fallen more than 2% to below $78/bbl as traders price increased oil shipments through the Strait of Hormuz. The move is now large enough to materially change the near-term inflation arithmetic. However, the operational details still matter. Trump has said the memorandum is in effect, but there is uncertainty over how quickly Iran will fully restore shipping and how fast insurers, shippers and energy buyers regain confidence. The political risk premium has compressed sharply, but it has not vanished. Currency markets are more cautious. Most emerging Asian currencies are weaker against the Dollar, with the Indonesian Rupiah and Philippine Peso under pressure. The Yen has fallen to its weakest level against the Dollar since July 2024, even after the BoJ raised rates earlier this week to the highest level since 1995. That leaves markets alert to the possibility of Japanese FX intervention. The issue is not just the level of USDJPY, but the signal that investors still doubt the BoJ is tightening fast enough to support the currency and contain inflation.

The Fed meeting is the key macro anchor. The FOMC left the target range unchanged at 3.50-3.75%, but markets interpreted the outcome as hawkish. The important nuance is that the statement’s removal of the easing bias would have been more clearly hawkish under Powell. Under Warsh, however, the statement was dramatically shortened, making it more consistent with his known preference for reducing guidance. This was not simply a case of keeping the old framework and deleting dovish language; it looked more like a structural decision to remove guidance almost altogether. That distinction matters for market interpretation. Warsh appears to be moving the Fed toward a “less is more” communications regime, where markets are given fewer explicit signposts and forced to price the reaction function themselves. His decision not to submit forecasts for the dot plot reinforced that message. This is a very different style from the guidance-heavy Fed markets have become used to. But “less” did not mean “none.” The median Fed funds estimate for 2027 rose 50bps to 3.6%, which is a clear sign that the centre of gravity of the rest of the Committee has shifted in a hawkish direction since the previous meeting. Risks to inflation are still viewed as skewed to the upside. On that basis, higher Treasury yields and a stronger Dollar were rational market responses, even if Warsh himself is trying to communicate less. The Fed’s longer-term direction remains unsettled. Warsh announced five independent task forces covering communications, the balance sheet, sources of data, productivity and the inflation framework. That means it may take the rest of the year to understand where his policy framework truly lands. Still, even if the market-priced October hike does not materialise, it is now much harder to see the Committee backing near-term easing. The hurdle for cuts has risen.

That matters directly for the BoE today. With the ECB already hiking and the Fed being interpreted as more hawkish, Bailey’s wait-and-see strategy could eventually be challenged through the exchange-rate channel. If Sterling weakens because markets see the BoE as lagging peer central banks in responding to the energy shock, imported inflation forecasts could rise and force a belated UK rate hike. In other words, the UK policy outlook cannot be judged entirely in domestic isolation. For now, though, the domestic UK data still support a hold. Yesterday’s CPI report was friendlier than expected, with headline inflation below BoE staff forecasts and services inflation also softer than projected. Today’s labour-market data are more resilient than employer surveys had suggested, but not strong enough to overturn the broader softening story. Employment improved on both main measures. Labour Force Survey employment rose 100k on a 3m/3m basis to April, above the 73k median forecast. The more timely payrolled employee number for May printed +2k versus expectations for -23k, while April’s initially bleak -100k reading was revised to -53k. The unemployment rate dipped to 4.9% from 5.0%, reinforcing the message that the labour market is not falling away as quickly as feared. Wages were firmer too. Average weekly earnings on a 3m y/y basis came in at 4.4%, unchanged from the revised previous reading, but well above expectations for a fall to 4.0%. The detail is important, though. Private-sector pay growth continued to slow, while the offset came from a renewed pickup in public-sector wages. That fits more closely with the weaker tone from business surveys and suggests the underlying private-sector wage trend is still moderating.

From the BoE’s perspective, the broader picture remains one of a softening labour market and easing domestic inflation pressure. The wage trend is still heading lower where it matters most for private-sector inflation persistence, and the drop in oil prices after Trump’s Iran deal gives Bailey more cover to look through the earlier energy shock. The argument for holding rates is stronger than it was a week ago. That does not mean the MPC will be united. Pill is still likely to vote for a hike, and Greene’s recent comments suggest she may join him. Mann is the swing risk if she decides the inflation risks require a more activist response. But with CPI undershooting forecasts, oil falling and private-sector pay growth moderating, the most likely outcome remains an unchanged Bank Rate at 3.75% with a 7-2 vote to hold. A 6-3 split would be hawkish at the margin, but still not the central case. The bigger UK risk lies beyond today. If the Fed and ECB keep leaning hawkish while the BoE stays on hold, Sterling could become the pressure valve. A weaker currency would complicate the UK inflation outlook and could eventually pull the MPC toward tightening despite weaker domestic activity. That is not today’s decision, but it is the risk Bailey will need to manage in the guidance.

Overnight Headlines

SNB Likely To Hold Rates Ahead Of US-Iran Peace Deal
BoE Set To Deliver ‘Active Hold’ As Rate Path Is Reevaluated
Makerfield By-Election Could Reshape UK Labour's Leadership Battle
US And Iran Sign Deal Ahead Of Schedule, Sources Say
Trump Defends Iran Deal: Want To Avoid ‘Economic Catastrophe’
Crude Oil Edges Lower As Deal To Reopen Hormuz Goes Into Effect
Fed Holds Steady, But More Officials See Higher Rates As Next Move
Traders Now See Fed Raising Rates By September
Warsh Forms Task Force To Review Fed’s $6.7T Balance Sheet
JPM’s Michele Says Fed Market Message Is To Brace For Hikes
Yen Slides To Weakest Level Versus Dollar Since July 2024
Asia Strategists Eye Yen Intervention, Tech Stocks Post-Warsh
New Zealand’s Economy Accelerated Before War Sapped Momentum
China’s $300B Pile Of Bad Consumer Debt Threatens Economy
Microsoft Makes Big AI Inroads In China By Selling OpenAI Models
Anthropic Boss Tells G7 Leaders To Resist AI Splintering
SpaceX Shares Fall For First Time Since Blockbuster Debut

FX Options Expiries For 10am New York Cut

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

EUR/USD: 1.1500 (EU9.06b), 1.1640 (EU3.49b), 1.1650 (EU2.13b)
USD/JPY: 155.00 ($1.79b), 158.00 ($1.56b), 161.00 ($1.54b)
AUD/USD: 0.7050 (AUD2.59b), 0.7100 (AUD1.55b), 0.7170 (AUD1.2b)
GBP/USD: 1.3525 (GBP825.1m), 1.3630 (GBP786.5m), 1.3400 (GBP607.6m)
USD/CAD: 1.3735 ($884.1m), 1.3900 ($562.8m), 1.3670 ($534.8m)
USD/CNY: 6.7400 ($450m)
USD/BRL: 4.9500 ($633.5m), 5.8000 ($352.3m), 5.3500 ($338.2m)
USD/KRW: 1440.00 ($416m), 1550.00 ($407.7m), 1460.00 ($369.8m)
USD/MXN: 17.20 ($690m), 17.60 ($348.3m), 17.45 ($334.7m)
EUR/GBP: 0.8675 (EU727.4m)
NZD/USD: 0.5890 (NZD514.4m), 0.5885 (NZD300.5m)

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 7580 Target 7700
Below 7400 Target 7185

DXY

Daily VWAP Bullish
Weekly VWAP Bullish
Above 99.70 Target 101
Below 99.40 Target 98.40

EURUSD

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

GBPUSD

Daily VWAP Bearish
Weekly VWAP Bearish
Above 1.35 Target 1.3580
Below 1.3375 Target 1.3150

USDJPY

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

XAUUSD

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

BTCUSD

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