The Front Runner

September 23, 2026

Elias Haddad

US September PMI to test growth edge narrative. USD extends gains.

Eurozone September PMI beats expectations, UK disappoints.

US Treasury 20-to-30-year buyback operation due today.

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Brent crude oil prices firmed up after dropping the past five days but are holding just under $100 a barrel. Restoration of flows from Saudi Arabia's East-West pipeline and US-Iran diplomacy hope are keeping energy prices in check. US President Donald Trump said that envoys Steve Witkoff and Jared Kushner had “a very good meeting” with members of the Iranian delegation.

USD continues to grind higher against all major currencies in line with widening interest rate differentials. While tightening by other major central banks limits policy divergence with the Fed, US economic outperformance should keep the dollar supported. Today’s September S&P Global PMI readings will likely show the US maintaining its growth edge over the Eurozone, UK, and Japan.

The US Treasury liquidity support buyback operation in the 20-to-30-year sector is scheduled today. The bond market backdrop is somewhat calmer now than at the September 9 operation, when a $6bn Treasury buyback in the 10-to-20-year sector failed to stop yields rising. Today’s buyback may further steady the long end of the curve, but lasting relief will require oil prices to normalize lower.

EUROZONE

EUR/USD is down on broad USD strength. The Eurozone September PMI was stronger than anticipated and backs additional ECB hikes. The composite PMI increased to a 41-month high at 53.1 (consensus: 51.7) vs. 52.0 in August. The details showed services growth quickened to a 10-month high, manufacturing was unchanged at a multi-year high of 52.7, and both Germany and France contributed to the expansion in private sector growth.

The swaps curve more than fully price in a total of 75bps of ECB tightening to 3.25% in the next twelve months. That would leave the policy rate above the ECB’s 1.75% to 3.00% neutral range estimate and limits EUR downside. Next support levels for EUR/USD are offered at 1.1400, 1.1353 (July 28 low), and 1.1325 (June 24 low).

GBP/USD is down on broad USD strength while EUR/GBP is a little firmer. UK September PMI undershot expectations. The composite PMI fell to a three-month low at 51.7 (consensus: 52.0) vs. 52.5 in August. The details showed services sector growth slowed, manufacturing activity gained traction, and inflationary pressures intensified.

The swaps curve continues to imply about 100bps of BOE rate hikes in the next twelve months to 4.75%. In our view, the BOE may not need to tighten as much as markets expect. The UK economy is already operating below capacity, the Bank Rate at 3.75% is near the top of the BOE’s estimated 2% to 4% neutral range, and fiscal policy will likely turn more restrictive. Bottom line: GBP remains vulnerable to a dovish BOE repricing.

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