Daily Market Outlook, August 18, 2025
Patrick Munnelly, Partner: Market Strategy, Tickmill Group
Munnelly’s Macro Minute…
Asian markets experienced gains as investors looked forward to President Trump's discussions with Zelenskiy, building on the recent summit with Russia that did not exacerbate geopolitical strife.The MSCI Asia Pacific Index rose by 0.4%, fueled by gains in China and Japan, while South Korea lagged. Futures for European stocks increased by 0.2%, and S&P 500 futures were up by 0.1%. A gauge of Shanghai-listed stocks is set for its highest closing in a decade. Indian equities surged by 1.5%, the largest rise in over three months, as plans were announced to cut the consumption tax for the first time in nearly ten years. Crude oil prices varied as concerns over supply disruptions subsided. The Dollar index held steady. U.S. Treasuries edged up, with the 10-year yield dropping 1 basis point to 4.30%. Gold saw a 0.6% increase, whereas cryptocurrencies experienced a decline. In a notable development, foreign ownership of U.S. Treasuries hit a new record in June, reflecting persistent interest in American government securities despite a decrease in the dollar, which raised questions regarding views on U.S. assets.
Following Thursday’s notable upside surprise from the PPI data, Friday brought additional information that challenges the narrative of a September rate cut. July retail sales in the control group showed a 0.5% month-over-month increase. While this was only 0.1 percentage point above consensus, it followed a 0.3 percentage point upward revision for June, bringing June’s growth to 0.8% month-over-month. This weakens the argument that the buoyancy in retail sales could be dismissed as a one-off event tied to Amazon Prime Day. Additionally, import prices rose by 0.4% month-over-month overall, with core import prices increasing by 0.3% month-over-month. In the context of tariffs, one might expect falling import prices as overseas sellers seek to maintain competitive consumer prices. However, this trend has yet to materialize. Instead, the risk emerges that U.S. importing firms will pass tariffs onto consumers, compounding the import price increases. In the short term, this dynamic seems likely to contribute to inflationary pressures, potentially leaving more moderate members of the Federal Open Market Committee (FOMC) uneasy about the market’s pricing of a greater than 90% chance of a September rate cut. Federal Reserve Chair Jerome Powell faces a significant communications challenge as he prepares to address these concerns at Jackson Hole on Friday.
The upcoming Jackson Hole Symposium (Friday) is expected to be a pivotal moment for markets as Federal Reserve Chair Powell outlines the Fed's near-term policy direction. However, as is often the case, differing opinions from figures like Trump and Bessent may add to the noise, especially with ongoing discussions around Fed appointments, potential legal challenges, and changes in the labor market report. Before that, the July FOMC minutes (Wednesday) could provide valuable insights into what might bridge the divide on rate outlooks.
In the UK, it will be a data-heavy week. The highlight will be the inflation report (Wednesday), where any deviation from the Bank of England staff’s anticipated 3.8% year-on-year CPI headline rate, as forecasted in the August Monetary Policy Report, could further question the likelihood of another rate cut this year. While a Budget date remains undecided, the public finances remain under scrutiny, making Thursday's monthly report critical, even though year-to-date borrowing is still within OBR projections. Additional UK data includes July retail sales figures (Friday) and Fitch’s sovereign credit rating update (Friday). However, the most impactful news for the UK and beyond will likely come from the flash August PMIs (Thursday).
Globally, the Reserve Bank of New Zealand is expected to cut rates by 25 basis points to 3% (Wednesday), while the Riksbank is anticipated to hold steady. In the eurozone, aside from the flash PMIs, attention will focus on the ECB’s latest report on negotiated wages (Friday), which could offer further clues about inflationary pressures.
Overnight Headlines
US, Russia Agreed On Ukraine Security Pledges, Witkoff Says
NATO-Like Protection In Focus For Trump Meeting With Ukraine, Europe
European Leaders To Join Ukraine’s Zelensky For Meeting With Trump
Trump Tells Zelenskyy To End War, Echoing Kremlin Demands On NATO
Putin Returns To Moscow With Air Of Triumph After Summit
Oil Markets Seen Bearish After Trump-Putin Alaska Meeting
Bond Market’s Rate-Cut Bets Enter Decisive Stretch With Powell
Central Bankers Flock To Jackson Hole At Pivotal Moment
Fed’s Bostic Gets Earful On Tariff Costs, Consumer Pain On Tour
China’s $11T Stock Market Is A Headache For Both Xi And Trump
EU-US Trade Statement Held Up Over Digital Laws
Japan: US Is Not Pressuring BoJ For Rate Hikes, Markets Not So Sure
Tesla Almost Halves UK Monthly Lease Fee As Sales Slump
Citi Raid On JPM Investment Bankers Reaches Double Digits
BTC, ETH, XRP Weak Momentum Raising Risks Of Deeper Pullbacks
FX Options Expiries For 10am New York Cut
(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)
USD/JPY: 146.50 (428M), 147.50 (338M), 147.90-00 (645M)
148.40-45 (606M), 149.00 (207M), 149.30 (353M), 149.50 (1.04BLN)
150.00 (302M). EUR/JPY: 172.72-75 (286M)
USD/CHF: 0.7940 (300M), 0.8100 (300M), 0.8180 (301M)
EUR/CHF: 0.9450 (285M), 0.9475-85 (438M)
GBP/USD: 1.3425 (472M)
AUD/USD: 0.6425 (241M), 0.6475 (1.02BLN), 0.6500-10 (692M)
0.6525-30 (413M), 0.6570-75 (931M). NZD/USD: 0.5925 (216M)
USD/CAD: 1.3450 (206M). USD/ZAR: 17.6500 (200M)
CFTC Positions as of the Week Ending August 15
Speculators have reduced their net short position in CBOT US Treasury bonds futures by 49,646 contracts, bringing it down to 60,794. They have also decreased their net short position in CBOT US Ultrabond Treasury futures by 19,235 contracts to a total of 209,132. Additionally, speculators have lowered their net short position in CBOT US 10-year Treasury futures by 17,611 contracts, resulting in a position of 942,223. Conversely, there has been an increase in the net short positions for CBOT US 5-year and 2-year Treasury futures, by 29,492 contracts to 2,566,369 and by 54,074 contracts to 1,379,597, respectively.
Equity fund managers have raised their net long position in S&P 500 CME by 46,675 contracts, bringing it to 887,310, while equity fund speculators have increased their net short position by 74,016 contracts to a total of 396,132.
The net long position in Japanese yen stands at 74,234 contracts, and the euro has a net long position of 115,431 contracts. On the other hand, the British pound has a net short position of -39,093 contracts, and the Swiss franc shows a net short position of -28,043 contracts. Lastly, Bitcoin’s net short position is recorded at -742 contracts...
Technical & Trade Views
SP500
Daily VWAP Bullish Above 6440 Target 6500
Weekly VWAP Bullish Above 6300 Target 6150
EURUSD
Daily VWAP Bullish Below 1.17 Target 1.15
Weekly VWAP Bullish Below 1.1640 Target 1.14
GBPUSD
Daily VWAP Bullish above 1.3260 Target 1.34
Weekly VWAP Bullish Below 1.3360 Target 1.3050
USDJPY
Daily VWAP Bearish Below 1.4880 Target 1.45
Weekly VWAP Bearish Below 1.4770 Target 1.45
XAUUSD
Daily VWAP Bearish Below 3380 Target 3320
Weekly VWAP Bearish Above 3350 Target 3600
BTCUSD
Daily VWAP Bearish Above 120k Target 130k
Weekly VWAP Bearish Below 118k Target 110k
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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!