Daily Market Outlook, July 17, 2026

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Minute — Chips Crack, CrudeClimbs

The market is ending the week with two bruises: AI fatigue and Hormuz heat. The semiconductor selloff has gone from profit-taking to position-clearing, dragging Asia toward its worst levels in months, while Brent’s rebound toward $85/bbl keeps the inflation-risk premium alive. Soft US CPI and PPI were enough to cool Fed hike pricing but not enough to calm the broader tape. The message from markets is blunt: rate expectations have softened, but risk appetite has not been rescued.

The MSCI Asia Pacific Index fell 2.7%, approaching its lowest close in two months, while Japan’s Nikkei 225 dropped 5.2%, its steepest decline since March. Chip names led the damage. TSMC is on course for its biggest one-day fall since April 2025, while Japan’s Kioxia plunged as much as 16%. Nasdaq 100 futures fell 1.4%, and European stocks are set to open more than 1% lower.

This is no longer just Korea’s problem. Earlier in the week, the Kospi was the lightning rod, reversing violently as SK Hynix and Samsung were hit by AI valuation doubts. Today’s weakness has broadened into Japan and Taiwan, which matters because the AI trade is not a single-stock story. It is a global supply-chain trade. When investors start marking down the whole stack — memory, foundry, equipment and storage — the signal is more serious.

The Netflix after-hours miss added to the sour mood. Shares fell 9% after the company forecast a second consecutive quarter of slowing sales growth. That is not directly a semiconductor story, but it is a reminder that earnings season is now testing whether growth stocks can keep delivering against elevated expectations. In a market already questioning the AI multiple, any hint of slowing top-line momentum hits harder.

Oil is not surging disorderly, but it is refusing to go away. Brent rebounded from Thursday’s losses to trade around $85/bbl, leaving crude up roughly 12% on the week and on track for its largest weekly gain since April. The renewed pressure comes as US-Iran hostilities continue, the Strait of Hormuz blockade remains a live risk, and shipping traffic through the route continues to thin. Fresh headlines underline the point. UKMTO reported a tanker was hit by an unknown projectile 19 nautical miles east of Oman’s Khasab, with minor structural damage reported. Iranian state media also said the IRGC targeted a US maritime surveillance radar in Oman. These are the kinds of incidents that keep insurance costs, routing uncertainty and geopolitical risk premia embedded in crude even when spot prices are not breaking higher. Brent at $85/bbl is awkward for central banks. It is not high enough to guarantee a policy panic, but it is high enough to stop markets from fully celebrating softer inflation data. This week’s US CPI and PPI reports were clear downside surprises, and rate markets responded. Before CPI, markets priced around 43bps of Fed hikes by year-end. That has now fallen to roughly 27bps. But other assets are behaving as though the Fed is still more hawkish than the curve suggests. Gold is the cleanest example. Normally, a fall in expected future rates should improve the relative appeal of a non-yielding asset. Instead, bullion has failed to respond convincingly. That tells us the market is not simply trading the rates strip. It is also trading real-yield uncertainty, Dollar resilience, geopolitical risk and doubts about whether soft inflation prints can survive another energy shock.

Fed rhetoric has not helped the relief trade. Vice Chair Jefferson revived late-Powell-era language, saying policy is “well positioned,” but added that if actual inflation does not start to cool soon, it could be appropriate to reconsider the current stance. Dallas Fed’s Logan was more explicit, saying modestly higher rates would better balance the outlook and risks. Kansas City’s Schmid said inflation is still not where policymakers want it to be. That is the Warsh Fed in practice: less guidance, more dispersion, more room for markets to argue with themselves. Warsh has described FOMC meetings as a “family fight” rather than a source of clean forward guidance. The intended consequence is uncertainty. The unintended consequence is a tape where rates, gold, equities and FX can tell different stories at the same time.

US retail sales added to the case for caution. June figures were broadly in line with expectations — advance sales rose 0.2% m/m, ex-autos fell 0.2%, and the control group rose 0.5% — but upward revisions to prior months make the trend look stronger than the headline suggests. Consumers are still spending, and not only on essentials. Annual comparisons are striking. Advance sales are now running at 8.4% y/y on a not-seasonally-adjusted basis, up from 5.7% previously, with ex-autos matching that pace. The control group held onto last month’s gains at 6.4% y/y, the highest since early 2023 and above the long-run average of 4.4%. With CPI surprising lower, that strength likely extends to real volumes too.

The consumer story is therefore resilient, but not costless. The more detailed PCE data show households have been dipping into savings to absorb the shock from higher gasoline costs. The pickup in discretionary categories, including autos, online sales, electronics and sporting goods, suggests consumers are doing more than just looking through a temporary energy hit. Labour-market resilience helps, but wealth effects and stronger non-wage income are also doing work.

Japan is trying to manage two problems at once: a weak Yen and a fragile bond market. The Yen hovered around 162.45 per Dollar, near its weakest levels in four decades, even as Finance Minister Katayama reiterated that the government is watching markets closely and wants to avoid misunderstanding around fiscal and monetary policy. She also repeated that specific monetary policy decisions remain for the BoJ. Prime Minister Takaichi sharpened the domestic-asset message, saying the government will encourage investment in Japanese financial assets by households and pension funds, including GPIF. She also noted that GPIF can rebalance nimbly by selling foreign assets and buying domestic assets when the Yen weakens. That is a clear attempt to frame domestic capital recycling as part of the stabilisation toolkit. Markets will hear two things in those comments. First, the government wants to lean against Yen weakness without overstepping into BoJ territory. Second, it wants more domestic savings absorbed into Japanese assets, which could support JGBs and equities at the margin. But with Dollar-Yen still above 162, verbal management is not yet a trend change.

The UK calendar next week has a clear domestic skew. Public borrowing and labour-market data arrive Tuesday. The fiscal numbers have already shown some slippage, and while volatile inflation-linked borrowing costs are often blamed, the broader story also includes rising expenditure and softer revenue growth. That will matter under a new political leadership backdrop.

The labour-market data may be closer to the monetary sweet spot. Employment has started to look a little better, while wage pressures are cooling. For the BoE, that is close to optimal: not too hot, not too cold. Wednesday’s inflation report carries slightly less market weight after two consecutive downside surprises and softer US and euro-area inflation prints. Headline and core CPI should ease from May’s 2.8% and 2.6% y/y rates, helped by falling energy prices in June. A small upside surprise would be more forgivable in that context. UK retail sales land Friday and should show consumers continuing to smooth the upfront costs of the Iran shock by drawing on savings. As in the US, the key question is whether that supports a genuinely improving retail trend or simply delays the hit from higher energy costs.

The ECB should leave rates unchanged on Thursday. Hawks will remain concerned about second-round effects from higher oil, and Middle East volatility gives them ammunition. But lower June CPI and soft activity data make an immediate move hard to justify. Lagarde is likely to retain optionality, framing the environment as close to baseline rather than adverse. The decision should be steady; the tone will matter more. European data are relatively light, with ZEW Tuesday and flash PMIs Friday. The US calendar is thinner, with Chicago and Kansas City Fed surveys Thursday, followed by new home sales and building permits Friday. Fed speakers will be absent as the pre-meeting quiet period begins, which means markets lose a source of daily reaction-function colour just as oil, equities and rates are pulling in different directions.

Globally, Canada CPI on Monday, Japan CPI on Tuesday and Australia labour-market data on Thursday are worth watching. Japan CPI will be especially relevant given the Yen weakness, energy pressure and the government’s increasingly visible attempt to steer domestic capital flows.

The market message is the week is closing with a market that has softer inflation data but harder risk conditions. Semiconductors are no longer being granted the benefit of the doubt, Brent is high enough to keep central banks uncomfortable, and the Fed is deliberately refusing to simplify the path ahead. AI still has the secular story, but earnings now need to defend it. Oil still has the geopolitical premium, but spot needs to break higher to shock again. Until one of those resolves, the tape stays choppy, defensive, and allergic to easy narratives.

Overnight Headlines

US Launches New Strikes On Iran As Hormuz Traffic Slumps
Trump Confronts Limits To US Power To Secure Strait Of Hormuz
US Targets Iranian Bridges In Bid To Choke Off Regime’s Supply Routes
Oil Holds Big Weekly Gain As Iran War Escalation Threatens Flows
Chevron To Explore Pipeline Bypassing The Strait Of Hormuz
Fed’s Jefferson Says Policy Well Positioned, Can Reconsider If Needed
UK Mortgage Rates Rise Again After Resumption Of MidEast Hostilities
Investors Say BoE Should Slow Or Stop Long-dated Bond Sales
Top Currency Forecaster Says Yen May Reach 170 Against Dollar
Dollar Set For Weekly Drop As Traders Cut Wagers On Rate Hikes
China’s Xi Vows To Make AI For All At Top Tech Summit
Google Delays Gemini Launch After Missing Internal Goals
US Chip And Memory Stocks Slide In Fresh Wall Street Selloff
Mitsubishi Electric Eyes Power-Chip Merger With Rohm And Toshiba
Boeing, Airbus Vie For Major Aircraft Order From SMBC Aviation Capital
Netflix Shares Fall As Sales Forecast Disappoints And Growth Slows

FX Options Expiries For 10am New York Cut

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

EUR/USD: 1.1350 (EU1.39b), 1.1500 (EU1.16b), 1.1300 (EU936.2m)
USD/JPY: 160.00 ($1.28b), 160.25 ($1.01b), 162.00 ($541m)
AUD/USD: 0.7000 (AUD470m)
USD/CAD: 1.4075 ($652.2m), 1.4090 ($487.1m), 1.4015 ($475m)
USD/BRL : 5.0700 ($600m)
GBP/USD: 1.3320 (GBP476.1m)
EUR/GBP: 0.8600 (EU319.8m)
USD/CNY: 6.7595 ($300m)

CFTC Positions as of July 10

Equity fund speculators raised their net short position in the S&P 500 CME by 4,100 contracts to 352,582, while fund managers decreased their net long position by 7,794 contracts to 971,333.
Speculators also increased their net short positions in various Treasury futures: CBOT US 5-year by 38,606 contracts to 1,359,116, CBOT US 10-year by 5,371 contracts to 814,262, and CBOT US UltraBond by 21,150 contracts to 307,819. They reduced the net short position in CBOT US 2-year futures by 26,573 contracts to 1,261,008 and increased the net short position in Treasury bonds by 52,811 contracts to 143,591.
Bitcoin's net long position stands at 3,500 contracts. The Swiss franc, British pound, euro, and Japanese yen have net short positions of -37,414, -87,903, -16,227, and -123,778 contracts, respectively.

Technical & Trade Views

The AI/momentum unwind deepened, with the high-beta pair down 7.5% and now 33% off the highs, triggered by a high-expectations miss from TSM. But the rest of the market worked: RSP rose 1%, medtech surged on ABT, UNH raised guidance, and industrials squeezed on strong trucker results. The key message is that the momentum unwind looks like it is in the later innings, supported by cleaner one-year positioning and the absence of a clear fundamental break, but it is not risk-free given still-elevated five-year positioning and the looming test of AI capex commentary this earnings season. Meanwhile, the broadening trade is providing genuine offset, keeping the S&P near highs and above the 7,427 CTA pivot. Tactically, this remains a market to rotate rather than de-risk wholesale: lean into the broadening (medtech, industrials, cleaner cyclicals), selectively re-engage washed-out AI/semi names where positioning has reset, own Monday QQQ optionality to capture the Korea catch-up, and keep index skew/protection on given the earnings gauntlet ahead. With the implied range at 7,489–7,577 and CTA support at 7,427, the setup favors constructive-but-hedged positioning into the heart of earnings season.

SP500 - 7500 weekly bull/bear level

Daily VWAP Bearish
Weekly VWAP Bullish
Above 7500 Target 7619
Below 7490 Target 7390

DXY - 99.75 weekly bull/bear level

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

EURUSD - 1.1525 weekly bull/bear level

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

GBPUSD - 1.3450 weekly bull/bear level

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

XAUUSD - 4100 weekly bull bear level

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

BTCUSD - 61k weekly bull bear level

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