Macroeconomics: The Day Ahead for 15 October 2026

Risk Sentiment Reverses as AI and Rate Expectations Compete for Attention

Whether one wants to call it a case of ‘reality bites’, or just another swing in volatile market risk sentiment, there has clearly been a significant shift over the past 24 hours, as the somewhat higher than expected US CPI initially triggered a sharp rise in Treasury yields and a sharp shift higher in the chances of a Fed October rate hike from 20% to 50%. Only for a further sell-off in tech stocks, triggered by disappointment over OpenAI’s Q3 revenue announced at a pre-IPO meeting, as well as a sharp widening in AI corporate CDS prices (above all Coreweave), to see UST yields turn sharply lower and the odds of an October Fed rate hike pared back to just under 30%.

As ever, positioning has been a key driver. As we pointed out earlier in the week, the recent surge in Nasdaq futures long positions, and the long-running hefty short in UST positions, left risk sentiment vulnerable, particularly given the increasing attraction of government bond yields at current levels. The question is whether this proves to be another ‘storm in a tea cup’ or a more protracted adjustment to portfolio weightings and positions. Geopolitical tensions continue to cast a long shadow, but may be temporarily subordinated to markets indulging in one of their bouts of introspection.

US Inflation Data Highlights the Importance of Underlying Components

Be that as it may, there is plenty of other news for markets to digest, with the Fed’s Beige Book highlighting increased pass-through price pressures, and Fed speakers signalling further rate hikes, while continuing to lean against a more aggressive policy path, even if one Fed watcher has suggested that the Fed will not hike in October but may opt for a 50 bps hike in December.

As ever, the details of any economic data report require attention, which the knee-jerk reaction to CPI failed to apply. To be sure, a 0.33% m/m increase in core CPI looked ominous, but a more detailed consideration of the report shows that, aside from the impact of higher gasoline prices and airfares, and a very surprising rise in Used Auto Prices (totally out of line with a fall in the Manheim Used Car Price Index, probably due to seasonal adjustment), it was the rebound in OER (housing) that accounted for much of the rise. This owes a lot to rising mortgage rates rather than being demand-driven, as highlighted by weak home sales and falling mortgage applications.

Indeed, the breadth of goods price pressures continued to narrow, particularly for household-related items such as furniture and electrical appliances. Today’s PPI is also likely to see energy driving a headline rise of 0.6% m/m for an unchanged 5.4% y/y, while the ex-Food, Energy & Trade measure is forecast at 0.4% m/m and 4.8% y/y.

After surging in August, Retail Sales are seen slowing to 0.3% m/m from 1.1%, weighed down by a 4.7% m/m drop in Auto Sales, while the core Control Group measure is also expected to slow to 0.3% m/m from 1.2%. Risks look to be skewed to the downside of the consensus, reflecting both a correction to the ‘back to school’ boost in August and potential deferral of spending to October’s Amazon Prime ‘Big Deal Days’, as high energy prices and rising rates prompt some household belt tightening.

NY and Philly Fed Manufacturing surveys are expected to remain robust, with the focus on prices paid and received, as well as business outlooks, while Initial Claims are expected to remain low by historical standards.

UK Growth Surprises Continue Amid BoE Policy Debate

Following on from the IMF’s relatively upbeat assessment of the UK economy and public finances comes today’s monthly GDP report, which easily beat expectations for a third month in a row and points to another robust increase in quarterly GDP for a third consecutive quarter. Growth was paced by strength in Manufacturing Output (adding 0.1 ppt) and Professional Scientific Services, mainly computer programming and AI-related activities (adding 0.4 ppt).

It would be premature to declare that technology-related activity is driving a structural transformation in the UK economy, but the recent run of data continues to challenge some of the prevailing pessimism surrounding the outlook.

Comments from BoE hawks such as Pill and Greene in recent days, at events around the IMF meeting, while clearly signalling a rate hike in November and the likelihood of more thereafter, have nevertheless leaned against markets discounting four rate hikes over the next 12 months. In a similar vein, ECB policymakers are increasingly citing rising government bond yields as potentially allowing a shallower rate trajectory, with Dolenc joining the likes of Wunsch and Simkus in making this argument in recent days.

Earnings, Commodities and Production Updates Remain in Focus

Outside of these developments, there is the very strong TSMC earnings report to digest, alongside further US financials and Alcoa results, as well as Q3 production and trading updates from Antofagasta and TotalEnergies. Agricultural commodity markets will also be watching Q3 Cocoa Grindings data and the US NOPA monthly oilseed crush report.