Weekly Market Review, W/C 14th September 2026: Three Central Banks, One Week

Rating: Mixed, Conviction Low | Bias: Selective Shorts, Question the Consensus Trade

The Big Picture

A genuinely mixed week, and the kind where the honest answer is that the read is unclear. Inflation is pushing central banks toward tightening rather than easing, and the market has moved decisively toward expecting a US rate hike when the Fed decides on 16th September. CME FedWatch now puts the probability above 84%, with some measures closer to 89%. Three weeks ago that figure sat in the 30 to 40% range.

The question worth sitting with is whether there is any edge left in the obvious trade. When something is this heavily priced, much of the move tends to be behind us. The ECB's own hike last week is the useful reference point. It was fully expected, delivered exactly as forecast, and the euro barely moved. EUR/USD slipped below 1.1600 on the announcement, recovered into the New York close and settled near 1.1610. A fully priced hike delivers no fresh yield support, and the pair traded accordingly.

Three Central Banks in One Week

The ECB moved on Thursday 10th September, raising the deposit rate 25bp to 2.5% from 2.25%, with all three key rates lifted and effective from 16th September. It was the second hike of 2026, following June's increase and a pause in July, and the decision was unanimous.

The Fed decides on Wednesday 16th September, and this is a Summary of Economic Projections meeting, so an updated dot plot lands alongside the decision. That matters as much as the rate move itself given how much of the hike is already in the price.

The Bank of Japan then meets Thursday and Friday, with markets pricing a high probability of a 25bp increase.

The CPI Print, Read Properly

August CPI rose 0.4% month on month and held at 3.4% year on year. Both readings were in line with consensus, so the headline itself was not the surprise. The surprise was in core, which rose 0.3% month on month against 0.2% expected and 0.2% in July.

Worth being balanced about what that means. Core annual inflation actually eased to 2.4% from 2.5%, the lowest reading since March 2021, and the three month annualised rate sits around 2.0%. So the monthly tick up is real and it moved the odds, but the annual core trend is still heading lower. The strength was concentrated in non-housing services, which posted its strongest monthly gain since January and remains above 3% on a twelve month basis. That stickiness in services is the part the Fed will care about.

Energy did the heavy lifting on the headline. Gasoline rose 3.9% on the month and is up 27.4% year on year, accounting for over a third of the monthly all items increase. With oil hovering around $100 per barrel following Saudi Arabia's shutdown of the East-West pipeline, that pressure is not easing yet.

A note on consensus. Three weeks ago major forecasters were genuinely split, with Goldman Sachs calling a September hike very unlikely while J.P. Morgan expected one. That split has since largely closed, with both now aligned behind a hike. When the disagreement disappears this quickly, it is worth asking what is left to be surprised by.

Volatility Waking Up

The VIX is rising meaningfully. Spot closed at 15.84 on Friday 11th September and is trading around 17.6 today, up over 11% on the day. VIX futures sit higher at 18.50, which tells you the market is paying up for protection beyond the immediate window rather than just reacting to today's move. That is a more considered signal than a spot spike alone, and it is consistent with traders positioning ahead of the Fed rather than chasing after it.

Credit spreads are still historically tight, which is the tension in this week's picture. Equity volatility is waking up while credit stays calm. That divergence is worth watching rather than dismissing, since the two usually converge eventually. One of them is wrong. The MOVE index is also elevated as bond investors reprice rate and inflation expectations.

USDJPY bottomed near 153.00 on 8th September, its weakest print in about seven months, before clawing back toward 154.50 and then weakening past 154 again on Friday as the dollar recovered on hot producer price data. The yen is being supported by BoJ hike expectations, carry trade unwinding, and rising JGB yields, with the 10-year recently reaching 3%, its highest since 1996. Treasury Secretary Bessent has also been vocal about Japanese authorities responding to excessive currency moves, which has made traders more cautious about betting against the yen.

Technical Setups This Week

Short Russell 2000. Small caps are the most rate sensitive part of the US equity market and the first to feel pressure if the hike lands. The AI infrastructure build-out is heavily debt financed, which adds a second channel of vulnerability if financing costs climb.

Short FTSE 100. Consistent with the broader risk-off tone building across volatility and the global nature of synchronised central bank tightening. Worth flagging that the FTSE has been holding up better than its peers in recent sessions, so this setup is leaning against relative strength rather than following weakness.

Short Aluminium and Zinc. Industrial metals tend to reflect growth concerns early when rate hike risk rises and liquidity tightens. Both gained ground in early September on supportive manufacturing data, so this is anticipating a reversal rather than following existing weakness. The technical trigger needs to be clean before committing.

Short Yen Crosses. With the BoJ likely hiking this week, carry trades unwinding and JGB yields at multi-decade highs, yen strength has structural support behind it. This is the setup where the technical and fundamental picture align most cleanly. The caveat is that the BoJ decision lands Thursday and Friday, so position sizing should reflect that event risk rather than ignore it.

Live Positions

S&P 500. Closed at a Loss. The long position has been closed. Rather than defend a position through a week with this much event risk and no clean supportive backdrop behind it, the decision was to step aside and protect capital. Taking the loss and moving on is the right call when the original thesis no longer holds.

USDMXN. Closed at a Loss. Rising Fed hike odds threaten broad dollar strength, including against the peso, which works directly against the thesis.

What to Watch

• Fed decision and dot plot, Wednesday 16th September.

• BoJ decision, Thursday and Friday.

• Whether the VIX move continues or fades. It confirms or denies the risk-off read

• Credit spreads. Still tight while equity volatility rises. That divergence needs to resolve one way or the other

• Oil around $100 following the Saudi pipeline shutdown. It is driving the inflation picture and therefore the central bank response.

These are my views based on my own analysis at the time of writing. Nothing here is financial advice. Always do your own research and manage your risk.