Daily Market Outlook, July 23, 2026

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Minute — Crude Squeezes, Chips Surge

Markets are still buying the AI story, but oil is making the macro backdrop harder to ignore. Asian chipmakers extended their rebound as investors leaned back into the long-term demand case for AI infrastructure, yet Brent’s push toward $96.50/bbl has now largely erased the dovish rates reaction to last week’s soft US inflation data. The equity tape looks resilient on the surface, but the rates market is quietly being forced back toward the energy-shock playbook.

The MSCI Asia Pacific Index rose 1%, while South Korea’s Kospi rallied 3.7%, led again by Samsung and SK Hynix, both up more than 3%. The regional recovery reflects renewed conviction that AI infrastructure spending remains a durable earnings driver, particularly for memory and advanced chip suppliers. After last week’s forced selling and valuation scare, the market has been quick to return to the names with the clearest exposure to AI capex. That optimism is not universal. Nasdaq 100 futures slipped, with US tech sentiment more cautious after Alphabet’s results. Alphabet’s shares fell more than 3% in after-hours trading after capital expenditure came in higher than expected, reviving the familiar debate over whether AI spending is creating future earnings power or simply raising the investment hurdle. Tesla dropped around 4%, while IBM also softened after earnings. The message from US megacap tech is less clean than the Asian chip rally suggests: investors like AI exposure, but they are starting to interrogate the cost of staying in the race.That distinction matters. For Asian semiconductor names, higher AI capex is demand. For US platform companies, higher AI capex is both ambition and margin pressure. The same theme can therefore be bullish for suppliers and more ambiguous for spenders. Earnings season is now turning the AI trade from a broad narrative into a more selective cash-flow test. Oil remains the main macro threat. Brent rose as much as 2.5% to nearly $96.50/bbl, its highest level since early June, after reports that Iranian-backed Houthi militants targeted two Saudi oil tankers in the Red Sea. That widens the energy-risk map beyond Hormuz to the Bab el-Mandeb Strait, another critical artery for global trade and oil flows. The result is a broader maritime risk premium, not just a Gulf-specific one. The escalation comes as Trump warned that the US would strike Iranian infrastructure if attacks on vessels in the Strait of Hormuz continue, while Iran has issued its own threats in response. The market is therefore dealing with a two-channel energy shock: direct supply disruption risk and the possibility that military escalation raises insurance, freight and rerouting costs even without a full physical closure.

Fed pricing has adjusted accordingly. The dovish reaction to last week’s soft CPI and PPI reports has now essentially been unwound, with around 42bps of Fed Funds tightening priced by year-end. Money markets put the probability of a hike at next week’s meeting at roughly 30%, versus a 70% chance of no change. That is still not a full panic, but it is a clear reminder that inflation relief is fragile when Brent is approaching the high $90s. The rates reaction has been measured relative to the scale of the oil rally, but that is partly because rate expectations never fully chased oil lower when Middle East headlines temporarily improved. In other words, markets did not price a full peace dividend, so they have not needed to price a full war premium either. Even so, the direction is unmistakable: energy is pulling Fed expectations back up.This is why the equity rally feels slightly narrower than the headline indices imply. Semiconductor strength is masking a more uncomfortable macro mix of higher oil, higher inflation risk and central banks with less room to sound relaxed. If Brent moves decisively through $100/bbl, the AI trade will face a much tougher discount-rate backdrop, even if the earnings story remains intact.

In the UK, the new government has delivered a third consecutive morning of policy announcements. Today’s measure is a 20% cut in business rates for pubs, clubs and many live music venues, with an estimated cost of around £100mn. The government says the measure is fully funded, but details will only be set out at the Budget. Businesses deemed not to make a positive contribution to local communities, such as vape shops, will see their reliefs reviewed. Individually, the measures announced this week are small. The electricity VAT cut, bus fare cap reduction and hospitality rates support total around £1.5bn. In budgetary terms, that is not enough to destabilise the gilt market by itself. The problem is visibility. Tuesday’s electricity VAT announcement said any further cost-of-living action would come at the Budget alongside an OBR forecast. Since then, the government has announced further measures on both bus fares and hospitality rates.That inconsistency matters more than the immediate cost. Gilt investors can usually handle small fiscal giveaways. What they dislike is a rolling sequence of spending commitments without full funding detail. Yesterday’s bus fare cap funding plan had the feel of what the OBR calls a “potential fiscal illusion”: a measure that may avoid worsening the fiscal-rule metric while still having implications for gilt supply. Today’s announcement is simply light on detail. The broader question for gilts is whether this is a short burst of retail politics from a new administration or the start of a more expansive fiscal stance. The appointment of John Healey as Chancellor, the defence-spending debate, cost-of-living measures and Burnham’s stated willingness to use fiscal-rule flexibility all point in the same direction. The market does not yet have enough information to price a fiscal rupture, but it has enough to demand a risk premium if the pattern continues.

The ECB should leave rates unchanged today, so the focus is entirely on Lagarde’s framing of September. Markets already price more than a 90% probability of a 25bp hike in the deposit rate to 2.5%, which means the ECB does not need to give explicit guidance to validate the market view. It simply needs not to push back. The first thing to watch is the risk balance. In June, the ECB emphasised upside inflation risks and downside growth risks. At Sintra, Lagarde sounded closer to balanced. With oil rising again and Middle East tensions intensifying, a return to the inflation-upside and growth-downside framing would support September hike pricing. Repeating “broadly balanced” would be read as dovish. The second signal is how she treats the staff projection scenarios. The June projections included a “milder” scenario built around softer energy prices. That looks less credible with Brent near $96/bbl. Any emphasis on the milder scenario would suggest a softer policy bias. Sticking to the baseline would be more consistent with a September hike. The third signal is whether Lagarde uses directional language. In April, her comment that she knew “directionally” where policy was heading was interpreted as a strong steer ahead of the June move. A similar phrase today would reinforce the September hike narrative, though she may prefer to preserve optionality given the volatility around oil and activity data. The likely outcome is no policy change and no firm precommitment, but a tone that leaves September live. The ECB has little reason to fight market pricing while oil is rising and inflation risks are again skewing upward. The central bank can remain data-dependent without sounding relaxed.

Thursday’s market message: chips are carrying equities, but crude is carrying macro. The AI infrastructure trade still has buyers, especially in Asia, where capex by US platforms translates directly into supplier demand. But Brent near $96/bbl is tightening the inflation backdrop, rebuilding Fed hike pricing and giving the ECB hawks more ammunition. Today’s market is not risk-off, but it is not comfortable either: the semiconductor rally is real, and so is the oil shock.

Overnight Headlines

Trump: Will Bomb Iran’s Power Plants, Bridges if Tehran Strikes Ships
Oil Jumps After Houthis Attack Two Saudi Tankers In The Red Sea
Iran Threatens Regional Energy Facilities If Attacked
US Surges Forces Toward Mid East, Giving Trump Options To Expand War
UK Consumer Sent. Picks Up In July But Still "Fragile", BRC Survey
BoJ To Raise Rates Again By December As Weak Yen Revives Inflation Risks
Australian Jobs Soar 76,300 In June, Boosting Rate-Hike Bets
US Senate Panel Approves Bill To Crack Down On Chinese Vehicles
Google Boosts 2026 Spending Estimate To As Much As $205 Billion
Tesla’s Q2 Rev Surged Amid $5.8 Billion Spend in AI, Robotics
IBM Lowers Growth Outlook As Sales Of Data Center Mainframes Sink 42%
Amazon Investigated Over Chinese Influence By US Senate Panel
Intel, AMD Sign Long-Term Server CPU Deals With Chinese Clients
OpenAI’s AI Spending Spree Has Ballooned To $750 Bln
Texas Instruments Posts Higher Q2 Profit, Rev As Sales Increase
‘Falling Apart’: Trump’s Boeing Deal Hits Turbulence With Beijing
Paramount Wins EU Approval For $81 Billion Warner Bros. Deal
Southwest Beats Estimates On Strong Demand, Premium Spending

FX Options Expiries For 10am New York Cut

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

EUR/USD: 1.1630 (EU2.05b), 1.1450 (EU1.93b), 1.1400 (EU1.68b)
USD/JPY: 163.00 ($986.1m), 162.75 ($734.7m), 161.45 ($649.9m)
AUD/USD: 0.6930 (AUD1.01b), 0.6900 (AUD744.5m), 0.7030 (AUD467.5m)
GBP/USD: 1.3440 (GBP450.1m), 1.3695 (GBP408.9m), 1.3400 (GBP405.7m)
USD/BRL: 5.1000 ($564m), 5.0500 ($506.1m), 5.3500 ($448.6m)
USD/CNY: 6.7800 ($1.03b), 6.7700 ($434.1m), 6.7540 ($310m)
USD/MXN: 18.75 ($425m), 17.25 ($330m)

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

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>Bullish
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>Bearish
Weekly VWAP Bullish
Above 62.5k Target 68.1k
Below 61k Target 52.2k