Today’s Market Outlook 17 September 2026 Dollar Rally Pauses Focus on the Bank of England Vote Split, QT Policy, and To
Today’s Market Outlook
17 September 2026
Dollar Rally Pauses
Focus on the Bank of England Vote Split, QT Policy, and Tomorrow’s BOJ Meeting
Market Overview
The dollar rally that followed yesterday’s FOMC has paused in the Tokyo market.
Oil prices have fallen following reports that Saudi Arabia is progressing with pipeline repairs. This has eased the inflation concerns and upward pressure on U.S. yields that had supported dollar buying.
USD/JPY fell from around ¥156.30 to the mid-¥155 range. EUR/JPY and GBP/JPY are also struggling to rise, as yen buying ahead of tomorrow’s Bank of Japan policy meeting is adding to the broader correction in dollar strength.
The main event for the rest of the day is the Bank of England policy announcement at 12:00 London time. Afterwards, markets are likely to focus on U.S. economic data and position adjustments ahead of tomorrow’s BOJ meeting.
Lower Oil Prices and the Dollar Correction
Oil prices, which had surged on heightened Middle East tensions and supply concerns, are now retreating following reports of pipeline repairs in Saudi Arabia.
Lower oil prices tend to lead to:
• Reduced concern over reaccelerating inflation
• Less aggressive expectations of further Fed rate hikes
• A pause in the rise of long-term U.S. yields
• Position adjustments in long-dollar trades
However, the underlying Middle East situation has not been resolved. If pipeline repairs are delayed or new attacks occur, oil prices and the dollar could recover again.
The key question is whether the oil move is only a temporary correction or the beginning of a more sustained decline as supply concerns ease.
USD/JPY
USD/JPY rose to around ¥156.30 before falling back into the mid-¥155 range.
The dollar buying seen after yesterday’s FOMC has run its course for now. Lower oil prices, together with yen buying ahead of tomorrow’s BOJ meeting, are weighing on the pair.
In London trading, USD/JPY recovered only as far as the upper ¥155 range before softening again toward ¥155.60. In the short term, the market appears vulnerable to selling on rallies.
On the upside, the ¥156.00–¥156.30 area is the immediate resistance zone. Unless this area is recovered, the view that dollar momentum has weakened is likely to gain traction.
On the downside, the key question is whether the pair can hold around ¥155.50. A clear break below that level would bring ¥155.00 and then the upper ¥154 range into focus.
However, with the BOJ meeting approaching, investors may be reluctant to build one-sided positions. Volatile trading centred around the ¥155 area is therefore likely.
Bank of Japan Policy Meeting
A 25-basis-point rate hike is the market consensus for tomorrow’s BOJ meeting.
The hike itself is already substantially priced in, making the Bank’s stance on further rate increases the key focus.
If the BOJ clearly signals that it intends to continue raising rates, yen buying could strengthen and USD/JPY could fall toward the ¥154 and ¥153 areas.
Conversely, even if the BOJ raises rates, a cautious tone on the path of future policy could prompt sell-the-fact yen selling.
Position adjustments are likely ahead of the meeting today, and markets should watch closely for BOJ-related media reports and comments from officials.
Bank of England Monetary Policy Committee
The Bank of England is expected to leave its policy rate unchanged.
As a hold is almost fully priced in, the key factors for sterling will be the vote split, the policy statement, and the quantitative tightening policy.
At the previous meeting, the vote was 6–3 in favour of holding rates, with three members voting for a hike. The direction of sterling could shift depending on whether the number of members voting for a rate increase rises or falls at this meeting.
Markets are pricing in around an 80% probability of a rate hike in November. If the Bank of England does not signal support for the possibility of a November hike, sterling selling could intensify.
UK Inflation and Policy Assessment
UK CPI released yesterday showed a rise in headline inflation on an annual basis, while services CPI came in below market expectations.
Services prices and wages are particularly important for the Bank of England when assessing the persistence of inflation.
If policymakers place greater emphasis on slowing services inflation, they may adopt a more cautious approach to further rate hikes.
On the other hand, if they focus on the rise in headline inflation and persistent global energy prices, concerns over a November rate hike are more likely to remain in place.
The Bank of England’s QT Policy
Another key focus is the annual review of the Bank of England’s quantitative tightening programme, under which it reduces its government bond holdings.
As global bond selling has pushed long-term yields sharply higher, markets are watching closely to see how much the Bank will reduce the pace of QT over the coming year.
Some market participants expect the Bank to halt sales of longer-dated gilts, including 20-year and 30-year maturities.
If the Bank announces a halt to long-dated gilt sales or a substantial slowdown in QT, improved gilt supply-demand conditions could push long-term yields lower.
However, the FX impact could be complex.
If it is welcomed as a measure to stabilise financial conditions, it could support sterling. But if it is seen as an effective easing of monetary tightening, it could lead to sterling selling.
After the announcement, attention should focus not only on sterling but also on the reaction in UK gilt yields.
Sterling Markets
GBP/JPY fell to around ¥208.24 before rebounding into the ¥208.60 range, but has since softened again toward ¥208.40.
Ahead of the Bank of England announcement, there is no clear sterling-specific direction at present.
A hawkish outcome would likely support GBP/USD and GBP/JPY. Particular attention should be paid to any increase in the number of votes for a hike and language signalling a November rate increase.
A dovish outcome would likely weigh on GBP/USD. With yen buying also developing, GBP/JPY could see a larger decline.
EUR/JPY and the Euro
EUR/JPY recovered from around ¥178.48 to ¥178.80, but has softened again toward ¥178.60.
As with USD/JPY, yen buying ahead of tomorrow’s BOJ meeting is capping the upside.
Eurozone August HICP final data is due today, along with speeches from several ECB officials.
If there are no revisions to the preliminary HICP data, the market reaction is likely to be limited. Upward revisions or hawkish comments from ECB officials could support the euro, but for now, attention is likely to remain focused on the Bank of England and the BOJ.
U.S. Economic Data
The United States will release the following data:
• September Philadelphia Fed Manufacturing Index
• August housing starts
• Initial jobless claims
• August pending home sales index
If the data are broadly strong, markets may again focus on U.S. economic resilience and higher-for-longer rates, leading to renewed dollar buying.
Conversely, weaker-than-expected data could accelerate the adjustment in long-dollar positioning built up after the FOMC.
Particular attention should be paid to initial jobless claims, which may signal shifts in the labour market, and housing data, which are sensitive to higher interest rates.
Today’s Economic Data and Events
• Bank of England Monetary Policy Committee decision
• Bank of England policy rate, vote split, and QT policy
• Eurozone August HICP final data
• Canada August industrial product prices
• Canada July international securities transactions
• U.S. September Philadelphia Fed Manufacturing Index
• U.S. August housing starts
• U.S. initial jobless claims
• U.S. August pending home sales index
• Speeches by ECB officials
• U.S. 10-year Treasury Inflation-Protected Securities auction
• Canadian Prime Minister Carney’s State of the Nation address
Key Points for Overseas Markets
-
Whether the Bank of England vote split changes from the previous 6–3 result
-
Whether the Bank maintains the possibility of a November rate hike
-
Whether the annual pace of QT is reduced
-
Whether the Bank announces an end to sales of 20-year and 30-year gilts
-
Whether lower oil prices continue and deepen the correction in dollar strength
-
Whether USD/JPY can hold above ¥155.50
-
Whether yen buying accelerates ahead of the BOJ meeting
-
Whether U.S. economic data support post-FOMC dollar buying
-
Whether equity markets and long-term yields regain stability
Potential Scenarios
Hawkish Bank of England Scenario
If more members vote for a rate increase and the Bank maintains a strong willingness to hike in November, sterling buying is likely to dominate. GBP/USD may rise, although GBP/JPY could have limited upside due to yen buying ahead of the BOJ meeting.
Dovish Bank of England Scenario
If the number of votes for a hike declines and the Bank emphasises slowing services inflation or downside risks to growth, sterling selling is likely to strengthen. If a significant slowdown in QT is also seen as a retreat from monetary tightening, GBP/JPY could decline sharply.
Continued Dollar-Correction Scenario
If lower oil prices and U.S. yields persist, and U.S. economic data are also weak, the unwinding of post-FOMC dollar buying could gather pace. USD/JPY could fall below ¥155, while EUR/USD and GBP/USD could rebound.
Dollar-Rally Resumption Scenario
If oil prices rise again and U.S. economic data are strong, dollar buying could resume on inflation concerns and yield differentials. However, USD/JPY is likely to face heavier resistance in the ¥156 area due to caution ahead of the BOJ meeting.
Summary
Today, lower oil prices are causing the dollar buying that strengthened after yesterday’s FOMC to pause.
USD/JPY has fallen from around ¥156.30 into the mid-¥155 range, while cross-yen pairs are also facing yen buying ahead of tomorrow’s BOJ meeting.
For the Bank of England, the key factors are not the expected rate hold itself, but rather the vote split, the stance on a November rate hike, the scale of the QT reduction, and the treatment of long-dated gilt sales.
After the Bank of England decision, markets are likely to focus on U.S. economic data and oil prices while adjusting yen positions ahead of tomorrow’s BOJ meeting. Key levels to watch are whether USD/JPY can hold ¥155.50 and how GBP/JPY reacts to both the Bank of England decision and yen buying.
