Daily Market Outlook, August 17, 2026
Daily Market Outlook, August 17, 2026
Patrick Munnelly, Partner: Market Strategy, Tickmill Group
Munnelly’s Macro Missive - Dollar Dips As Retail Sales Dent Fed Hike Bets
The dollar is starting the week on the back foot after a disappointing US retail sales print pushed markets to further reduce the odds of a September Fed hike. Equities are holding a constructive tone, emerging-market currencies are benefiting from the softer dollar backdrop, and Treasuries remain supported. But the details of the retail report are less alarming than the headline suggests: the decline looks more like a partial unwind of earlier strength than evidence of a decisive consumer slowdown.
The dollar index fell 0.1%, extending its losing streak to a third day and leaving it near its weakest levels since May. The move was broad enough to lift MSCI’s emerging-market currency index to a record high, with the Taiwan dollar and Thai baht leading gains in Asia. The Asia Dollar Index also rose to its strongest level since May. The logic is familiar: softer US data lowers Fed hike expectations, compresses yield support for the dollar, and gives higher-beta currencies room to rally.
The shift in Fed pricing has been sharp. Swaps now imply less than a 30% chance of a September rate hike, down from nearly 50% a week ago and around 70% at the start of August. That repricing reflects a sequence of data that has been difficult for Fed hawks to act against: a weak headline payrolls number, contained CPI readings and now a soft retail sales report. The hawkish case has not disappeared, but the immediate policy trigger is missing.
Treasuries rallied across the curve. The two-year yield fell 2bps to 4.15%, while 10-year and 30-year yields each slipped 1bp. As with last week, the front end remains most responsive to reduced Fed tightening risk, while the long end is more restrained by fiscal supply, term-premium concerns and residual inflation uncertainty. The bond market is not sending a full all-clear signal; it is mainly saying September tightening looks less likely.
The July retail sales headline looked weak, with the steepest monthly decline in more than a year. But the breakdown was not especially troubling. Vehicle sales fell 1.8% m/m after a 2.4% bounce the prior month, making the move look more like payback than a collapse in demand. Non-store sales dropped 2.2% m/m, but this is not usually the category that best signals consumer stress. Gasoline sales fell 0.9% m/m, but that reflected prices rather than volumes: gasoline prices dropped 2.9% m/m, implying real consumption rose.
The rest of the retail basket was steadier. Clothing rose 1.9% m/m, perhaps helped by World Cup-related spending, while eating and drinking gained 0.5% and health-store sales rose 0.7%. That leaves the broader picture looking more like noise after a run of strong reports than evidence of a meaningful confidence shock. Consumers may be stretched, especially with low savings rates and weakening income growth, but high-income households remain the key driver of aggregate spending. With wealth effects still supportive, it is difficult to argue that consumption is about to roll over without either a clear labour-income shock or a sustained decline in asset prices.
Equity markets are taking the softer US data in stride. MSCI’s Asia Pacific index rose 0.2%, while Wall Street and European futures edged higher. Nasdaq 100 futures gained 0.3%, suggesting the AI and growth complex remains supported by the same lower-rate narrative that is weighing on the dollar. The global equity rally therefore still has a familiar backbone: easing Fed risk, resilient demand and continued enthusiasm around AI-linked investment.
Commodities are more mixed. Brent crude rose 0.2% to around $88.65/bbl, supported by renewed Israeli military action in Lebanon and the prospect of additional US sanctions on Iran. The geopolitical risk premium remains significant, even if it is not currently derailing risk appetite. Gold rose 0.4% to around $4,395/oz, helped by lower yields and a softer dollar. Copper also moved closer to record highs, with spot prices reaching as much as $478/ton, reflecting the combination of structural demand optimism and easier financial conditions.
The yen strengthened against the dollar after a report showed Japan’s economic growth unexpectedly slowed. Even so, USD/JPY remains uncomfortably close to the 160 area, where intervention risk remains live. The yen’s problem is still structural: softer US data helps at the margin, but durable relief probably requires either a clearer BoJ tightening path or a larger decline in US yields.
China will be in focus as monthly activity data are released. Economists expect a slight improvement in July consumer spending, while factory output may show signs of slowing. The data will matter not only for China itself, but also for the wider Asia FX and commodities complex. A better consumption signal would support the regional reflation narrative, while softer industrial output could temper some of the recent optimism around cyclical demand.
The UK calendar is busy this week. Labour-market and wage data arrive Tuesday, with pay growth likely to continue slowing, though the pace of deceleration should moderate due to base effects. Employment indicators may retain a soft tone, despite mild improvement in some surveys, and it is probably too early for any politically inspired confidence rebound to show through meaningfully. CPI on Wednesday should show headline inflation rising to around 3.0% y/y from 2.6%, driven mainly by the Ofgem price-cap increase. Lower petrol prices and possible food disinflation should partly offset that, while core inflation should slow modestly. That combination would support the BoE’s patient stance: headline inflation rises, but the underlying signal should be less threatening.
Friday brings UK public borrowing, retail sales and flash PMIs. After the upside surprise in Q2 GDP, the hurdle for the UK economy to outperform the BoE’s July forecasts is low. That makes this week’s data important for judging whether the Bank can remain patient or whether resilience in activity complicates the inflation picture.
The European slate is quieter. ZEW on Tuesday is more a reflection of market sentiment than the real economy and is unlikely to be decisive. Final July CPI on Wednesday should provide more detail on whether energy prices are feeding through the price chain. Friday’s inflation expectations, updated ECB wage tracker and consumer confidence data will be more useful for assessing how comfortable the ECB can be with its current policy stance.
In the US, Empire manufacturing and TICs data are due Monday. TICs may be the more interesting release, particularly for signs of official bond outflows and private equity inflows. Import and export prices on Tuesday remain relevant because rising costs linked to AI capex imports are part of the inflation-risk story. Wednesday’s July FOMC minutes should shed light on how far hawkish dissent extended beyond the three officials who voted against Warsh’s motion to hold. The weak payrolls number since that meeting has likely tempered immediate tightening prospects, but pipeline price pressures and brisk aggregate demand still leave the Fed with a complicated medium-term problem. Philly Fed, jobless claims and flash PMIs follow later in the week.
Macro To Micro: the dollar is weakening because the market sees fewer reasons for the Fed to hike in September. The retail sales headline helped that repricing, but the details do not yet point to a consumer downturn. For now, weaker Fed pricing supports equities, bonds, gold and EM currencies. The risk is that markets are reading noisy data as a clean slowdown while underlying demand, wealth effects and pipeline inflation remain firmer than the Fed would ideally like.
Overnight Headlines
Japan’s Economic Growth Slows As Mideast Conflict Clouds Outlook
Trump Says Asked Pentagon To Cut Military Drills With S Korea
Israel Strikes Lebanon As US Prepares Fresh Iran Sanctions
NATO Jets Down Suspected Russian Drone Over Romania
Hamas Leaders Tell Kushner They Will Demilitarize Gaza, Sources Say
Goldman Says Markets Too Hawkish On Betting Fed Will Hike Rates
Bonds Face A Bigger Threat Than The Fed As Global Rates Climb
US 20-Year Bond Sale To Test Demand As Yield Curve Steepens
Yen Stronger As Traders Cut Back Bets On Fed Rate Hike
Japan’s Bond Yields Climb On BoJ Hike Bets, Fiscal Concerns
UK House Prices See Biggest Aug Drop Since 2018, Sellers Slash Asking Prices
US Urges Apple Not To Buy Chinese Memory Chips
CXMT’s Rise To China’s Most Valuable Firm Heralds New Tech Era
Nvidia In Talks To Invest $3B In SB Energy As Part Of OpenAI Data Centre Deal
German Companies Cut US Investment To Three-Year Low
FX Options Expiries For 10am New York Cut
(1BLN+ represents larger expiries and is more magnetic when trading within the daily ATR.)
EUR/USD: 1.1500 (EU1.49b), 1.1900 (EU864.4m), 1.2100 (EU826.4m)
USD/JPY: 159.00 ($2.03b), 158.00 ($1.34b), 159.50 ($626.2m)
USD/CAD: 1.3975 ($416.1m)
AUD/USD: 0.7100 (AUD455.9m), 0.7200 (AUD360.1m)
GBP/USD: 1.3745 (GBP308.5m)
CFTC Positions as of 14/7/26
Bitcoin: net long position of 3,865 contracts
Swiss franc: net short position of -32,462 contracts
British pound: net short position of -56,221 contracts
Euro: net short position of -60,010 contracts
Japanese yen: net short position of -42,085 contracts
CBOT US 5-year Treasury futures: net short position reduced by 84,963 contracts to 1,240,756
CBOT US 10-year Treasury futures: net short position reduced by 64,190 contracts to 915,053
CBOT US 2-year Treasury futures: net short position increased by 16,815 contracts to 1,021,043
CBOT US UltraBond Treasury futures: net short position increased by 11,798 contracts to 326,783
CBOT US Treasury bonds futures: net short position increased by 3,335 contracts to 179,607
S&P 500 CME: equity fund speculators reduced net short position by 58,046 contracts to 261,531; fund managers raised net long position by 4,954 contracts to 942,062.
Technical & Trade Views
SP500 - 7620 weekly bull/bear level
Daily VWAP Bullish
Weekly VWAP Bullish
Above 7620 Target 7870
Below 7600 Target 7485
DXY - 100 weekly bull/bear level
Daily VWAP Bearish
Weekly VWAP Bearish
Above 99 Target 100
Below 98.90 Target 97.30
EURUSD - 1.15 weekly bull/bear level
Daily VWAP Bullish
Weekly VWAP Bullish
Above 1.1550 Target 1.17
Below 1.1480 Target 1.1420
GBPUSD - 1.35 weekly bull/bear level
Daily VWAP Bullish
Weekly VWAP Bullish
Above 1.35 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 - 4200 weekly bull bear level
Daily VWAP Bearish>Bullish
Weekly VWAP Bullish
Above 4200 Target 4400
Below 4100 Target 3570
BTCUSD - 64k weekly bull bear level
Daily VWAP Bullish
Weekly VWAP Bearish
Above 64k Target 71k
Below 61k Target 52.2k
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% and 73% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!