Daily Market Outlook, July 22, 2026

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Minute — Chips Cheer, Crude Chills

Markets are trying to run two stories at once: AI relief and oil anxiety. Semiconductor shares are extending their global rebound as forced selling eases and investors return to the AI complex, but Brent above $92/bbl is dragging inflation risk back into the centre of the rates debate. Equity leadership is coming from chips; macro pressure is coming from crude. That makes today’s tape stronger on the surface than it feels underneath.

The MSCI Asia Pacific Index rose 1%, extending Tuesday’s strongest rally in a month, while South Korea’s Kospi surged 4% as leveraged selling pressure continued to fade. Samsung and SK Hynix led the move, confirming that Korea remains the highest-beta expression of global AI sentiment. The rebound follows a more than 5% rally in the US semiconductor index on Tuesday, which pulled the group out of bear-market territory after last week’s drawdown. The recovery is important, but it is not yet conclusive. Investors are moving back into AI names ahead of major earnings, with Alphabet now the next key test for capex appetite and cloud/AI monetisation. The market does not need perfection, but it does need evidence that spending intentions remain intact and that AI infrastructure demand is not slowing at the margin. After last week’s valuation scare, guidance matters more than narrative. US futures are more cautious. Nasdaq 100 futures fell 0.4%, while S&P 500 futures were slightly lower, suggesting investors are not prepared to chase the rebound blindly into earnings. Asia is still repairing the damage from last week’s liquidation; the US is already asking whether the rally deserves a second leg. Oil is the complicating factor. Brent rose 1.4% to $92.25/bbl after Trump downplayed the prospect of immediate peace talks with Iran and threatened escalation against Pickaxe Mountain, a suspected nuclear facility. Military strikes have continued, and the stand-off over diplomacy remains unresolved. The result is a higher geopolitical premium and a renewed inflation impulse.That oil move has fed directly back into rates. A large part of the post-CPI drop in implied Fed tightening has now been unwound. After last week’s soft US CPI print, markets priced around 26bps of Fed tightening by the December meeting. That has now risen back to roughly 37bps. The message is clear: softer inflation data bought relief, but not immunity from an energy shock.

US Treasury yields have pushed to their highest levels in two months, reflecting the same concern. The June CPI downside surprise showed inflation cooling before the latest escalation in oil. Markets now have to decide how much weight to put on backward-looking disinflation versus forward-looking fuel and expectations risk. For the Fed, that is precisely the awkward zone: growth assets want a productivity story; rates markets are pricing an energy-tax story.

Congress added a modest fiscal footnote in the US, with the House passing a short-term funding bill through 4 December to avoid a shutdown before the November midterms. Senate approval is still required. This is not today’s market driver, but it reduces one source of near-term political disruption if completed.

Safe havens are also participating. Gold rose as much as 1.6% to around $4,142/oz, its highest level in two weeks, while silver and platinum also gained. That is notable because equities are not collapsing. The bid for precious metals suggests investors are hedging geopolitical and inflation risk rather than simply hiding from equity weakness. The Yen remains under pressure, breaking below 163 per Dollar for the first time since 1986. Finance Minister Katayama again warned that the government will take “appropriate and bold action at any time, should the need arise.” Traders are clearly testing the credibility of verbal intervention. The longer USD/JPY holds above 163, the more markets will debate whether Japanese authorities move from language to action.

The UK has added another cost-of-living measure. The government announced a cut in the ex-London bus fare cap from £3 to £2 from January, at an estimated cost of around £500mn. The amount is small relative to the overall fiscal position, and the government says it will be funded by reprioritising existing spending. Still, it sits uneasily beside yesterday’s message that any further cost-of-living action would come at the Budget. That matters for gilts because the individual measures are small, but the pattern is becoming visible. Scrapping VAT on household electricity bills, cutting bus fares and signalling broader ambitions around public services and investment all point to a government willing to use fiscal space early. Even if each policy is presented as funded, markets will focus on the aggregate stance and the risk that “reprioritisation” eventually becomes higher issuance or higher taxes. This morning’s UK CPI report was friendly for the BoE on the headline measure. June CPI came in at 2.6% y/y, 0.1ppt below consensus and a full 0.5ppts below the BoE staff forecast from the April MPR. Core CPI was also 2.6% y/y, 0.1ppt above consensus but still 0.1ppt below the BoE forecast. Services inflation was 3.6% y/y, in line with BoE expectations.

The standout detail is food. Food inflation eased another 0.5ppts to 1.7% y/y, less than half the 3.6% y/y rate the BoE expected at this stage. That is potentially significant because the MPC has repeatedly emphasised the role of visible food prices in shaping inflation expectations. If food keeps undershooting, it gives Bailey more room to look through the external energy shock. Overall, the CPI report supports Bailey’s existing message: domestic inflation is cooling enough to avoid a mechanical response to higher oil. Alongside the recent moderation in wage growth, it strengthens the case for patience. The BoE can argue that energy is an external shock and that policy should not overreact unless it starts to feed into wages, services or expectations. But this is not a complacency report. There are three reasons the rate outlook still carries upside risk. First, energy prices are rising again, and Brent above $92/bbl will matter if sustained. Second, government policy may add aggregate stimulus even when individual measures mechanically lower measured CPI in the short term. Third, services inflation remains relatively sticky versus expectations, suggesting there is still a domestic labour-market component to price pressure.That leaves Bailey with a fine line to tread at next week’s MPR press conference. He can lean on the downside CPI surprise, softer food inflation and moderating wages to justify looking through energy volatility. But the hawkish wing of the MPC is unlikely to retreat when oil is rising, fiscal activism is building and services inflation is not falling quickly.

Wednesdays market message: the AI trade has found its footing, but the macro ground is still shaking. Chips are bouncing because forced selling is fading and investors still believe in the capex cycle. Crude is rising because diplomacy is stalled and escalation risk remains live. For equities, Alphabet earnings will test the AI recovery. For rates, oil will test the disinflation story. Today’s market is a relief rally with a Brent-shaped warning label.

Overnight Headlines

Trump Vows US Will Soon Bomb Iran's Pickaxe Mountain
Trump Says US Will ‘Take Care’ Of Houthis If Red Sea Strait Blocked
Trump Sets 100% Tariff On Generic Drugs With Two-Year Delay
Carney, Trump Agree To Speed Up Trade Talks Before 50% Tariffs Hit
House Passes Stopgap To Avert Shutdown Before Midterm Election
Japan’s Trade Deficit Widens as Yen, Iran War Inflate Imports
Katayama Warns Of Bold Action As Yen Slides Past 163 Per Dollar
Japan 40Yr Bond Sale Sees Strongest Demand Since March 2025
Nvidia Details Its Next-Generation Vera CPU For AI
Google Expands Gemini Lineup With New Mythos Rival
Intel Plans Layoffs Within Its Data Centre Group
Anthropic Ramps Up Lobbying Spending Amid AI Policy Fights
Capital One Profit Beats Estimates As Loan-Loss Provisions Drop
Super Micro Jumps After Early Results Show Rising Backlog
Airbus Targets EUR13 Bln Adjusted Operating Profit By 2029
Zelenskyy Fires Top Army Commander Amid Nationwide Protests

FX Options Expiries For 10am New York Cut

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

EUR/USD: 1.1400 (EU2.85b), 1.1500 (EU844.7m), 1.1770 (EU534.4m)
USD/JPY: 163.00 ($1.58b), 157.50 ($1.43b), 162.50 ($952.6m)
AUD/USD: 0.6900 (AUD1.19b), 0.6325 (AUD1.12b), 0.6150 (AUD900m)
GBP/USD: 1.2925 (GBP300m)
USD/BRL: 5.1000 ($434.9m), 5.0700 ($425m), 5.0745 ($348.5m)
NZD/USD: 0.5475 (NZD818.9m), 0.5275 (NZD600m), 0.5840 (NZD380m)
USD/CAD: 1.4075 ($637.1m), 1.6000 ($310m)

CFTC Positions as of 17/7/26

Equity fund speculators have ramped up their net short positions on the S&P 500 CME, adding 6,873 contracts to reach a total of 359,456. Meanwhile, equity fund managers have reduced their net long positions in the S&P 500 CME by 30,209 contracts, bringing their total down to 941,123.
Treasury futures market, speculators have made some notable adjustments. They've trimmed their net short position in CBOT US 5-year Treasury futures by 64,833 contracts, leaving them with a total of 1,294,283. Conversely, they have increased their net short position in CBOT US 10-year Treasury futures by 17,413 contracts, now totaling 831,675. In the CBOT US 2-year Treasury futures market, there's been a significant reduction in net short positions by 103,531 contracts, bringing the total to 1,157,477.Additionally, speculators have upped their net short position in CBOT US UltraBond Treasury futures by 16,588 contracts to a total of 324,407 and have increased their net short position in CBOT US Treasury bonds futures by 35,465 contracts, reaching 179,056.
Bitcoin's net long position stands at 3,091 contracts. In the foreign exchange arena, the Swiss franc is showing a net short position of -36,956 contracts, while the British pound sits at -71,253 contracts. The euro has a net short position of -12,605 contracts and the Japanese yen is notably more bearish with a net short position of -122,663 contracts.

Technical & Trade Views

A classic capitulation snapback. Momentum rallied 9.4%, its strongest one-day move since COVID, led by the same AI and semiconductor names that had been heavily de-risked. Positioning is now materially cleaner, there is no clear fundamental catalyst behind the drawdown, and the market has room to retrace toward trend if earnings validate the AI capex story. But this is not a clean macro tape. Oil is near $85, yields are back above 4.6%, and investors are not chasing the bounce. That caution is appropriate into GOOGL and TSLA earnings tomorrow, where hyperscaler capex, cloud demand, margins, and 2027 planning will determine whether this momentum rebound becomes durable or just a violent bear-market-style factor bounce. Tactically: selectively buy the AI/momentum dip, favor cleaner AI winners and DRAM upside, fade overextended AI-loser relief rallies, and use the 7,451–7,567 implied range with 7,427 as the key CTA downside line.

SP500 - 7390 weekly bull/bear level

Daily VWAP Bullish>Bearish
Weekly VWAP Bearish>Bullish
Above 7390 Target 7560
Below 7380 Target 7280

DXY - 99.75 weekly bull/bear level

Daily VWAP Bullish
Weekly VWAP Bearish
Above 99.75 Target 102.50
Below 99.40 Target 98.40

EURUSD - 1.1525 weekly bull/bear level

Daily VWAP Bearish
Weekly VWAP Bullish
Above 1.1550 Target 1.1780
Below 1.1525 Target 1.1370

GBPUSD - 1.3450 weekly bull/bear level

Daily VWAP Bearish
Weekly VWAP Bullish
Above 1.3450 Target 1.3640
Below 1.33 Target 1.3050

USDJPY - 161.50 weekly bull bear level

Daily VWAP Bullish
Weekly VWAP Bullish
Above 162 Target 163.75
Below 161 Target 160.50

XAUUSD - 4100 weekly bull bear level

Daily VWAP Bullish
Weekly VWAP Bearish
Above 4200 Target 4500
Below 4100 Target 3569

BTCUSD - 61k weekly bull bear level

Daily VWAP Bullish
Weekly VWAP Bullish
Above 62.5k Target 68.1k
Below 61k Target 52.2k