Daily Market Outlook, August 7, 2027

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Missive - Markets Lose Oil Relief As Payrolls Loom

Markets are finishing the week with the inflation scare back on the table, as the hoped-for reopening of the Strait of Hormuz looks less clean than investors wanted. Brent is back near $84/bbl, Treasury yields have held yesterday’s rise, and the dollar has firmed as traders wait for today’s US employment report. The bigger issue is no longer simply whether oil is up or down on the day; it is whether energy volatility keeps the Fed trapped between sticky inflation, a still-tight labour market and slowing-but-not-broken growth.

Brent crude rose 1.6% to $83.80/bbl, reversing part of the week’s earlier decline after details of the Iran-Oman proposal disappointed markets. The agreement to reopen the Strait of Hormuz reportedly includes restrictive conditions, including bans on US and Israeli ships as well as fees and fines. That is not the clean normalisation energy markets had started to price. Oil is still down around 5% on the week after hopes of a US-Iran deal triggered a sharp drop, but the rebound shows how quickly geopolitical risk premium can return.

The practical point is that reopening Hormuz is not binary. A headline agreement is one thing; commercially viable, insurable and politically durable shipping access is another. If restrictions limit traffic, raise costs or keep military risk elevated, the energy market will not price the deal as a true supply-chain repair. Brent around $84/bbl is not a return to panic, but it is high enough to keep central banks uncomfortable.

Bond markets did not like the move. Treasury futures weakened, while the 10-year Treasury yield held around 4.68% after rising 7bps during the US session. Government bonds in Japan, Australia and New Zealand also sold off, reflecting the global nature of the energy-inflation channel. When oil bounces, the inflation relief narrative fades quickly, particularly after a week in which Fed officials have already sounded uneasy about declaring victory.

The dollar strengthened against most G10 currencies as higher yields supported the greenback. It steadied after its biggest one-day gain in two weeks during the New York session. The yen remains the clearest FX pressure point. USD/JPY is around 158.40, meaning the yen has now given back nearly half of its coordinated-intervention rally after touching 155.23 earlier in the week.

That yen reversal matters because intervention without a sustained shift in fundamentals is hard to defend. Japan and the US showed they can punish speculative positioning, but yield differentials, cautious BoJ tightening and renewed oil pressure still point in the other direction. The more Brent rebounds, the more Japan’s import-cost problem returns, and the more difficult it becomes to stabilise the currency through intervention alone.

Equities are quieter but less buoyant. Asian stocks slipped 0.2%, with South Korea down around 1%, continuing to trade as the high-beta shock absorber for the global AI theme. Wall Street futures were flat after the S&P 500 fell for a second straight day, despite hitting record highs earlier in the week. European equities are also set for a modestly softer open after closing at an all-time peak.

This looks like consolidation rather than capitulation. Global equities have had a strong run on AI optimism, lower oil and hopes that the Fed could remain patient. But the combination of higher crude, higher yields and today’s payrolls risk makes it harder to chase the rally aggressively into the weekend. The AI trade still has momentum, but the macro backdrop has stopped getting easier.

Fed commentary added to the hawkish tone. St. Louis Fed President Musalem, a non-voter, again favoured “meaningful restraint on underlying inflation” over “tolerating somewhat higher inflation today to pursue productivity growth tomorrow.” That sounded like a mild rebuke of Chair Warsh’s broader tolerance for allowing market rates and potential productivity gains to do some of the heavy lifting. It also reinforces that the Fed’s internal debate is not just about one meeting; it is about how much inflation patience the Committee can afford.

Today’s July employment report is therefore a major test. Consensus looks for around 82k payroll gains, but the week’s labour indicators have been mixed enough that the report could easily send conflicting signals. Job openings eased slightly, but the quits rate rose, suggesting labour demand is still buoyant. ADP was soft at just 44k, but pay growth for job movers accelerated to 7% y/y, consistent with competitive churn rather than a clean labour-market slowdown.

The unemployment rate may be the bigger story than payrolls. Recent declines in participation have left the 4.2% jobless rate looking unusually low relative to some weaker household-survey data. A payroll beat alongside a rise in unemployment to 4.3% would not be a wild outcome. That would leave markets with another ambiguous read: decent establishment hiring, but softer household dynamics once participation normalises.

There is also scope for noise. World Cup-related distortions could complicate the July figures, while preliminary benchmark revisions due on 28 August may later help explain the widening gap between the establishment and household surveys. For the Fed, the key question is not whether the labour market is cooling at the margin. It is whether it is cooling enough to offset inflation that remains above target and energy prices that refuse to stay down.

Next week brings the main inflation test with July CPI on Wednesday. After June’s surprisingly soft print, the Cleveland Fed nowcast suggests headline inflation could tick down slightly to 3.4% y/y, though many expect it to hold at 3.5% y/y. Core inflation is expected to fall 0.1ppt to 2.5% y/y, which may help contain hawkish pressure if delivered. But the Fed remains in a tight spot because spot inflation is still too high for comfort, especially if oil and gasoline prices keep feeding into expectations.

PPI follows on Thursday, while Friday brings retail sales and the University of Michigan sentiment survey. The latter could be particularly sensitive to the latest gas-price spike. If household inflation expectations rise again, it will undercut the comfort from lower core CPI and strengthen the case for the hawks. The Fed does not need one perfect inflation report; it needs a sequence of data that makes patience look credible.

Outside the US, the calendar is less dramatic but still useful. In the euro area, final July CPI prints for Germany and Spain are due Tuesday and Thursday, followed by a second look at Q2 GDP on Friday after the strong 0.4% q/q flash estimate. In the UK, the first estimate of Q2 GDP on Thursday is the main data point, alongside the RICS housing survey after Monday’s KPMG/REC jobs report. In Australia, the RBA is expected to keep rates at 4.35% on Tuesday after softer June labour-market and inflation data.

China’s July trade data showed another monthly surplus above $100bn, with the technology investment boom continuing to support exports. The tech strength reflects both volume growth and price effects, which matters for global inflation and supply-chain dynamics. China is still exporting disinflation in some areas, but the AI hardware cycle is creating pockets of price pressure in others, especially where capacity is tight.

Macro to Micro: the market’s cleanest bullish story — lower oil, lower yields, AI strength and patient central banks — has become messier again. Brent near $84/bbl keeps inflation risk alive, the yen’s intervention rally is fading, and Fed officials are still leaning against premature comfort. Today’s payrolls report can steady the tape if it shows cooling without weakness, but a hot wage or participation-adjusted unemployment mix would leave the Fed’s hawks feeling vindicated. The rally is not broken, but it is heading into payrolls with less protection than it had earlier in the week.

Overnight Headlines

China Exports, Imports Post Double-Digit Gains But Growth Slows
Japan’s April Yen-Buying Intervention Sets Fresh Daily Record
US Euro Sale To Prop Up Yen Blindsided European Central Bank
Fed’s Musalem: CenBank Should Have Hiked Rates At Last Meeting
Iran Seeks To Bar US Ships In Hormuz As Deal With Oman Advances
Israel Steps Up Attacks On Hezbollah, Clouding Talks With Lebanon
Turkey, Saudi Arabia, Pakistan To Sign Joint Defence Agreement On Friday
Copper Heads For Record Close In London On Tighter Global Market
Rio Tinto, BHP Summoned To Critical Minerals Meeting With Trump
Alphabet Looks To Raise Up To $25B From Latest Bond Sale
AIG Earnings Surpass Expectations After New CEO Takes Over
Paramount Pauses NFL Media Rights Talks Amid Legal Fights
Airbnb Lifts 2026 Outlook Again On US, European Demand

FX Options Expiries For 10am New York Cut

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

USD/JPY: 159.50 ($635m), 159.00 ($557m), 158.00 ($765m), 157.00 ($657m), 156.00 ($1.0bn)
EUR/USD: 1.1500 (EU1.5bn), 1.1500 (EU1.1bn), 1.1430 (EU642m), 1.1400 (EU649m)
AUD/USD: 0.7000 (AUD719m)
EUR/GBP: 0.8550 (EU1.0bn), 0.8675 (EU727m)

CFTC Positions as of 31/7/26

Equity fund speculators reduced their S&P 500 CME net short position by 28,795 contracts, bringing it to 287,277. Meanwhile, equity fund managers increased their net long position by 12,702 contracts to 939,115. The Bitcoin net long position stands at 3,904 contracts.
In currency positions, the Swiss franc has a net short of -33,462 contracts, the British pound -64,814, the euro -72,447, and the Japanese yen -163,412.
Speculators also decreased their net short positions in various Treasury futures: CBOT US 5-year by 126,929 contracts to 1,146,400; CBOT US 10-year by 3,587 contracts to 876,119; CBOT US 2-year by 30,023 contracts to 1,124,574; and CBOT US UltraBond by 642 contracts to 320,708. However, they increased their net short position in CBOT US Treasury bonds futures by 30,707 contracts to 217,497.

Technical & Trade Views

SP500 - 7485 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 Bullish
Weekly VWAP Bearish
Above 99 Target 98
Below 99 Target 100

EURUSD - 1.1550 weekly bull/bear level

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

USDJPY - 160 weekly bull bear level

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

XAUUSD - 4170 weekly bull bear level

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

BTCUSD - 64k weekly bull bear level

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