Daily Market Outlook, August 6, 2027

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Missive - Hormuz Hope Cools Crude, Fed Hawks Circle

Markets are pausing after a powerful equity rally, with investors balancing Hormuz reopening optimism against a messier US macro picture. Oil has continued to soften as Iran and Oman move toward a shipping-route agreement, giving risk assets some inflation relief. But US services prices are still hot, labour data are cooling only unevenly, and Fed speakers are not fully aligned. The result is a market that wants to celebrate lower crude, but cannot quite ignore the possibility that inflation pressure is lingering beneath the surface.

Wall Street’s rally finally took a breather after the S&P 500 added roughly $3.7tn in market value during the recent surge. The index slipped modestly, with most major tech names lower, although Nvidia continued to climb. That distinction is familiar by now: the AI trade remains alive, but investors are becoming more selective after the volatility of recent weeks.

The most dramatic single-name move was SpaceX, which fell 14% as around $101bn of stock became available for trading on Thursday. That is not necessarily a pure read on fundamentals, but it does show how sensitive richly valued AI-adjacent and growth assets remain to liquidity events, supply, and spending concerns. In a market already debating whether AI capex is becoming too aggressive, large blocks of available stock can quickly turn enthusiasm into indigestion.

Oil remains the main macro relief valve. US crude fell toward $75/bbl, while Brent continues to trade just below $80/bbl, supported by expectations that the Strait of Hormuz may reopen more fully. Iran said it had reached an agreement with Oman regarding a proposed shipping route through Hormuz, which would be a significant step toward easing pressure on one of the world’s most important energy corridors.

The market is pricing the probability of a deal rather than a completed normalisation. That distinction still matters. If the Strait reopens and shipping confidence returns, oil could shed more risk premium and central banks would gain breathing room. If implementation drags, the market may need to rebuild some geopolitical premium. For now, anticipation is doing enough to keep crude subdued.

Treasuries are taking their cue from the mix of lower oil and sticky services inflation. Cheaper crude reduces the immediate inflation impulse, but the US data are not giving the Fed a clean disinflation story. Services activity is holding up, prices are rising, and the labour market is cooling in a way that looks uneven rather than decisively weak.

The July ISM services index printed at 54.1, barely changed from 54.0 in June and 0.4pts below consensus. That is not a weak number. It suggests the services economy continues to expand at a steady pace. The business activity component also improved solidly, echoing Monday’s stronger manufacturing ISM and reinforcing the idea that Q3 began with decent growth momentum.

But the details were mixed. The employment component dipped into contraction territory, and the backlog of orders indicator softened. Those pieces point to some cooling in labour demand and future activity. The issue for the Fed is that the prices component rose 2.6pts to 70.3, which is an uncomfortably high level. Falling employment and rising prices are not a combination policymakers enjoy seeing. It is the kind of mix that makes the “misery index” lens — unemployment plus inflation — look less friendly.

There is a caveat. Over the last couple of years, the inflation warning embedded in services ISM prices has often barked louder than the hard inflation data later bit. So the Fed should not mechanically overreact to one survey component. But with inflation already above target and energy volatility still fresh in everyone’s memory, the rise in prices paid will reinforce hawkish caution.

The labour-market signals ahead of Friday’s payrolls report are similarly uneven. ADP reported a 44k private employment gain in July, 21k below consensus. The composition was also narrow: education and health contributed 36k of the headline increase, leaving many other industries looking stagnant or slightly negative. That supports the idea that labour demand is cooling outside a few resilient sectors.

However, the wage and churn signals are less dovish. Pay growth for job switchers accelerated to 7% y/y, which chimes with the earlier JOLTS report showing a pickup in the quits rate. Rising quits and stronger pay gains for movers suggest there is still some competitive churn in the labour market. In plain English: hiring may be slowing, but workers who move are still getting paid. That is not exactly the labour-market capitulation the Fed would need to relax fully.

Tomorrow’s payrolls report is therefore important, with consensus looking for around 80k job gains. A soft headline would support the view that labour demand is cooling. But if unemployment stays low, participation remains noisy, and wage growth is sticky, the Fed will still be able to argue that inflation deserves priority. The hawkish dissenters from last week’s FOMC meeting are unlikely to be dissuaded by the data so far.

Fed commentary reflects that tension. Mary Daly, a non-voter from San Francisco, outlined a scenario where she would be prepared to support a rate hike, but she also stressed that she was “completely supportive” of last week’s decision to hold. Her central case remains that the current inflation bout is short-lived. That makes her hawkishness conditional rather than immediate.

Lisa Cook, by contrast, sounded closer to action. She said that “if I do not see signs of continued disinflation soon, I am prepared to act.” Coming from a Board governor, that carries more weight than a peripheral hawkish comment. Cook did not explicitly dissent last week, but her language suggests she was less comfortable with the hold than the vote tally alone implied.

Neel Kashkari also kept the hawkish pressure alive, telling CNBC that the Fed should consider gradually increasing rates to rein in price pressures. After last week’s three hawkish dissents, this matters because it suggests the hawkish bloc may not be isolated. The Committee’s centre may still prefer patience, but the bar for continued patience is rising.

For equities, this leaves a familiar but delicate setup. Lower oil and potential Hormuz reopening are clear positives, especially for margins and inflation expectations. AI leadership remains supportive as long as names like Nvidia continue to attract buyers. But high valuations, mixed earnings, and sticky services prices limit how clean the risk-on story can be.

The tech tape is especially selective. Nvidia’s resilience shows investors still want exposure to the strongest AI infrastructure beneficiaries. But SpaceX’s sharp decline and recent disappointment from names with heavier AI spending remind markets that capex discipline matters. The AI trade is no longer one trade; it is a sorting mechanism.

Macro to Micro: markets have received meaningful relief from the Middle East, but not a full macro green light. Oil below $80/bbl helps, and a Hormuz agreement would remove a major inflation tail risk. Yet US services prices are still hot, labour demand is cooling unevenly, and Fed officials are sounding less unified than the hold decision suggested. The rally can continue if oil stays low and payrolls are soft-but-not-scary, but the Fed is not ready to declare the inflation fight won.

Overnight Headlines

Iran Reaches Agreement With Oman On Hormuz Shipping Route
Israel Launches Strikes On Lebanon In New Flare-Up
Pentagon Holds Crisis Meeting On Weapons Shortfall After Trump Call
Trump, Hegseth Clash Over Munition Shortages Affecting Iran War Strategy
Fed’s Cook Says Ready To Raise Rates If Inflation Doesn’t Cool
Fed’s Daly Says Central Bank Was Right To Hold Rates Steady In July
Trump Has Called Warsh Repeatedly Since He Became Fed Chair
Bank Of America Sees Yen Jumping 6% By End Of 2026
Australia Posts Surprise Trade Surplus As Commodity Exports Gain
Korea In Race To Keep Chips Edge As China Presses, Minister Says
Trump Readies Tariffs And Price Floors To Bolster US Polysilicon
Canada’s Carney Seeks Broader Tariff Relief As New 50% US Levy Looms
Google DeepMind CEO Demis Hassabis Steps Down In AI Lab Shake-Up
Meta Debuts First AI Coding Agent To Take On Anthropic And OpenAI
Western Digital Profit Surges As Revenue Grows
EBay Reports Second-Quarter Sales, Profit That Beat Expectations

FX Options Expiries For 10am New York Cut

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

USD/JPY: 165.45 ($1.12b), 164.50 ($1.01b), 155.35 ($980m)
EUR/USD: 1.1500 (EU1.72b), 1.1450 (EU985.5m), 1.1465 (EU984.1m)
AUD/USD: 0.7250 (AUD731m), 0.6950 (AUD538.4m), 0.7000 (AUD423.1m)
USD/CAD: 1.3955 ($776.2m), 1.3210 ($375m), 1.4055 ($319.6m)
GBP/USD: 1.3430 (GBP530.9m)
USD/MXN: 18.75 ($448.7m), 17.14 ($410m)
NZD/USD: 0.5650 (NZD555.3m), 0.5760 (NZD307.6m)

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

EURUSD - 1.1550 weekly bull/bear level

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

USDJPY - 160 weekly bull bear level

Daily VWAP Bearish
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