Daily Market Outlook, August 14, 2026

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Missive - AI Trade Roars Back As Fed Fears Ease

Global equities are on course for a third straight weekly advance, with investors rotating back into the AI trade just as softer US inflation data reduces the pressure for near-term Fed tightening. The combination has been enough to push both the MSCI All Country World Index and the S&P 500 to record highs, while Treasuries have held onto gains, and September Fed hike pricing has fallen sharply. The market’s message is clear: Middle East risk still matters, but fundamental data have reasserted themselves.

The MSCI Asia Pacific index rose 0.2% on Friday, helping keep the MSCI All Country World Index on track for its longest winning streak since April. European futures also point to a firmer open after regional equities reached new peaks earlier this week. The equity mood has improved materially since last month’s semiconductor wobble, with investors again willing to pay for AI exposure where earnings, capex and shareholder returns support the story.

South Korea remains the clearest expression of that rebound. The Kospi rose nearly 1.8% on Friday, taking its weekly gain to around 10% and snapping a seven-week losing streak. Samsung Electronics and SK Hynix have both gained more than 15% this week, helped by the revival in AI-linked semiconductor sentiment and positive investor response to shareholder-return plans. The move is notable not just for its size, but for what it says about market selectivity: AI enthusiasm is still powerful, but the strongest rallies are going to companies with credible revenue exposure and capital-return discipline.

US Treasuries are holding weekly gains after two softer inflation readings eased immediate Fed concerns. The two-year yield is steady around 4.15%, with the front end outperforming as markets scale back September tightening risk. Midway through August, the implied probability of a September Fed hike has fallen to around 30%, from roughly 70% at the start of the month. A negative headline employment report followed by contained CPI data has done what macro data are supposed to do: shift the policy debate.

The long end is less relaxed. The curve is slightly steeper after the $25bn 30-year auction cleared at almost 5.22%, the highest 30-year auction yield since 2001. That highlights the distinction between Fed pricing and term-premium pressure. Softer inflation and weaker payrolls can reduce near-term hike expectations, but persistent deficits, heavier issuance and inflation uncertainty continue to demand compensation further out the curve.

In China, the 10-year government bond yield fell to its lowest level since July 2025 after the PBoC injected liquidity through overnight reverse repos, its first mid-month operation of that type. The move reinforces the sense that Chinese policy remains focused on keeping funding conditions supportive, even as broader activity momentum remains uncertain. Monday’s monthly activity figures will be important for judging whether liquidity support is translating into better real-economy traction.

Oil remains a source of caution, even if it is no longer dominating the tape. Brent is hovering around $87/bbl, with markets watching the Middle East after Bessent raised expectations for measures next week aimed at engineering the “economic isolation” of Iran. The Strait of Hormuz risk premium has not disappeared, but the fact equities and bonds have rallied through it shows that investors are currently giving more weight to the improvement in US inflation data than to geopolitical tail risk. That balance could change quickly if energy prices move back toward recent highs.

The yen remains steady but vulnerable, trading around 159.40 per dollar and still close to the 160 level that keeps intervention risk alive. Reports that Prime Minister Sanae Takaichi’s government supports higher rates have not been enough to generate a durable yen rally. The currency still faces the same headwinds: wide yield differentials, high imported-energy sensitivity and the market’s suspicion that intervention can slow depreciation but not reverse it without a stronger BoJ policy shift.

Fed communication has become a little less hawkish at the margin. Chicago Fed President Austan Goolsbee described the recent inflation data as “getting a little bit better,” which helped stem the recent run of hawkish-leaning commentary. The July FOMC minutes, due next week, will be important for assessing how broad the hawkish dissent really was beyond the three officials who voted against Warsh’s motion to hold. Since that meeting, weaker payrolls have raised the bar for immediate tightening, but pipeline price risks and brisk aggregate demand mean the hawkish case has not disappeared.

The US data calendar next week should help refine that balance. Empire manufacturing and TICs data arrive Monday, with the latter especially relevant for tracking official bond flows and private equity inflows. Import and export prices on Tuesday will be worth watching because AI capex-related imports have become part of the inflation-risk discussion. The July FOMC minutes follow Wednesday, before Philly Fed and claims on Thursday and flash PMIs on Friday. The key question is whether the soft payrolls and CPI sequence is enough to keep the Fed on hold, or whether pipeline inflation and resilient demand keep tightening risks alive later in the year.

The UK calendar is busy. Labour-market and wage data arrive Tuesday, with pay growth likely to continue decelerating, though the pace of improvement may moderate due to base effects. Employment indicators are likely to retain a soft tone, despite some mild improvement in surveys. Wednesday’s CPI should show headline inflation rising to around 3.0% y/y from 2.6%, largely due to the Ofgem price-cap increase. Lower petrol prices and possible food disinflation should provide some offset, while core inflation should ease modestly. That mix would support the BoE’s patient stance: headline inflation may accelerate, but the underlying signal should be less alarming.

Friday brings UK public borrowing, retail sales and flash PMIs. The broader UK picture is one of modestly better activity momentum but still sticky inflation risks. After this week’s upside surprise in Q2 GDP, the hurdle for the UK economy to outperform BoE projections is low. That makes the upcoming labour and CPI data especially important for judging whether resilience is helpful or inconvenient for policymakers.

The European slate is lighter. ZEW on Tuesday is more a market-sentiment gauge than a real-economy signal and is unlikely to shift the macro debate. Final July CPI on Wednesday should provide more detail on whether energy prices are moving through the inflation chain. Friday’s inflation expectations, ECB wage tracker and consumer confidence data will be more useful for assessing how comfortable the ECB can be with the current policy stance.

Elsewhere, the focus will be on China’s monthly activity figures early Monday, Canada CPI, the Australian labour-market report, the Riksbank decision and Japan CPI. The common thread is whether global disinflation is broadening enough to let central banks wait, or whether country-specific price pressures keep policy risk alive.

Macro to Micro: AI has put the equity rally back on firmer footing, while softer US inflation and weaker payrolls have pushed September Fed hike odds sharply lower. That is enough to keep global stocks near records and Treasuries supported. But the longer-end bond market, elevated oil prices and pipeline inflation risks are still warning against declaring victory. Markets have regained confidence, but the Fed’s inflation problem has been postponed rather than solved.

Overnight Headlines

US To Use Economic Tactics On Iran ‘That Have Never Been Seen’
US Sending Fresh Aircraft Carrier To Middle East Amid Iran War Strain
Trump Imposes 100% Tariffs On Certain Drones, Countering China
Fitch Affirms The US At ‘AA+’; Outlook Stable
US Investment Giant T Rowe Says It Will Take Years To Stem Outflows
Japan Ex-Top FX Diplomat: May See More Yen Intervention, Faster BoJ Hikes
Australia Home Loans Fall Most Since Pandemic As Tax Changes Hit
Trump Agreed To Consider Australia Tariff Request, Albanese Says
Asian Memory Chipmakers Rise As Sandisk Outlook Lifts Confidence
Applied Materials Posts Higher Profit, Revenue On Continued AI Demand
OpenAI’s Revenue Run Rate Tops $40B Ahead Of IPO
Alibaba, Baidu, Kuaishou Address AI Costs As Competition Intensifies
LG To Unveil Next-Gen Humanoid Robot, Built On NVIDIA Isaac GR00T

FX Options Expiries For 10am New York Cut

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

EUR/USD: 1.1550 (EU1.21b), 1.1490 (EU1.15b), 1.1000 (EU929.5m)
USD/JPY: 155.00 ($2.5b), 158.00 ($1.25b), 160.00 ($889.1m)
USD/CAD: 1.4100 ($1.41b), 1.4225 ($734.2m), 1.3975 ($565.4m)
AUD/USD: 0.7100 (AUD671.1m), 0.7000 (AUD405.8m), 0.6900 (AUD301.6m)
GBP/USD: 1.3300 (GBP500.2m), 1.3510 (GBP475.3m), 1.3435 (GBP422m)
USD/BRL: 5.1000 ($384.6m)
USD/KRW: 1400.00 ($340m)
USD/MXN: 17.00 ($390.6m)
EUR/GBP: 0.8450 (EU330.4m)

CFTC Positions as of 7/7/26

Equity fund speculators raised their net short position in the S&P 500 CME by 32,299 contracts to a total of 319,577. Meanwhile, equity fund managers reduced their net long position by 2,008 contracts to 937,107.
Speculators also increased their net short positions in CBOT US 5-year Treasury futures by 179,319 contracts (totaling 1,325,719) and in CBOT US 10-year Treasury futures by 103,124 contracts (totaling 979,243). Conversely, they decreased their net short positions in CBOT US 2-year Treasury futures by 120,346 contracts (to 1,004,228), in CBOT US UltraBond Treasury futures by 5,723 contracts (to 314,985), and in CBOT US Treasury bonds futures by 41,225 contracts (to 176,272).
Bitcoin's net long position stands at 3,752 contracts.
The Swiss franc has a net short position of -32,822 contracts, the British pound -57,814 contracts, the euro -58,091 contracts, and the Japanese yen -45,473 contracts.

Technical & Trade Views

SP500 - 7620 weekly bull/bear level

Daily VWAP Bullish
Weekly VWAP Bullish
Above 7620 Target 7870
Below 7600 Target 7485

DXY - 99 weekly bull/bear level

Daily VWAP Bearish
Weekly VWAP Bearish
Above 99 Target 98
Below 99 Target 100

EURUSD - 1.1550 weekly bull/bear level

Daily VWAP Bearish>Bullish
Weekly VWAP Bullish
Above 1.1550 Target 1.17
Below 1.1480 Target 1.1420

GBPUSD - 1.3450 weekly bull/bear level

Daily VWAP Bearish>Bullish
Weekly VWAP Bullish
Above 1.3450 Target 1.3690
Below 1.34 Target 1.33

USDJPY - 160 weekly bull bear level

Daily VWAP Bullish>Bearish
Weekly VWAP Bearish
Above 155 Target 160
Below 155 Target 152

XAUUSD - 4170 weekly bull bear level

Daily VWAP Bearish
Weekly VWAP Bullish
Above 4170 Target 4400
Below 3940 Target 3570

BTCUSD - 64k weekly bull bear level

Daily VWAP Bearish
Weekly VWAP Bullish>Bearish
Above 64k Target 71k
Below 61k Target 52.2k