Daily Market Outlook, May 26, 2026 

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Minute — Oil Rebounds as Strikes Complicate the Peace Trade

Markets are starting the shortened week with a more cautious tone after US military strikes on Iranian targets knocked back optimism around a quick diplomatic settlement. S&P 500 futures are still up 0.6%, but that is well below the strength implied by Monday’s holiday rally, while Asian equities gained only 0.3% after fading from earlier highs. Europe is set to open lower. US Central Command said forces targeted missile launch sites and vessels suspected of attempting to lay mines, framing the operation as defensive, but for markets the message is straightforward: the peace trade is more fragile than Monday’s price action suggested.

Oil is the clearest expression of that reassessment. Brent has jumped 2.5% back above $98.50/bbl after falling more than 7% on Monday in thin holiday trading. The rebound complicates hopes for an interim deal to extend the ceasefire and reopen the Strait of Hormuz, even though Trump said talks were “proceeding nicely” and Pakistan’s military chief Asim Munir reportedly told China that an agreement was close. Investors are still cautiously optimistic, but the risk premium has not disappeared. As long as military action and negotiations are running in parallel, energy markets will remain vulnerable to abrupt reversals.

Cross-asset price action reflects that tension. The Dollar is firmer against all major currencies, while gold has reversed earlier gains and fallen around 1% to roughly $4,525/oz, suggesting the move is less about classic safe-haven panic and more about a stronger Dollar and shifting rate expectations. Treasuries have rallied across the curve as cash trading resumes after the US holiday, but government bonds in Japan and Australia have sold off, highlighting regional differences in inflation sensitivity and central-bank reaction functions. The broader equity backdrop is still supported by recent record highs and optimism that the worst of the energy crisis may have passed, but higher oil keeps the inflation problem alive and reinforces the case for the Fed to stay restrictive for longer.

UK gilts were last week’s standout. The 10yr gilt yield spread versus Treasuries tightened by more than 20bps, a move of more than two standard deviations and the strongest weekly outperformance since the Liberation Day fallout just over a year ago. Unlike that episode, however, gilts outperformed in a bond rally rather than a selloff. The driver was not obviously a fading of political risk, but a rapid repricing of MPC expectations after a near clean sweep of downside surprises in UK data: employment, wages, inflation, PMIs and retail sales all pointed softer. In simple terms, weak macro data shifted the market away from pricing UK rate hikes and toward a more patient Bank of England.That gilt performance should not be over-interpreted as an all-clear. Andy Burnham has committed to the current fiscal framework, but uncertainty around a potential leadership contest and the policy stance of other candidates remains unresolved. Fiscal fragility is also still present, especially after the first month of the fiscal year showed a sizeable overshoot in the current budget deficit. Last week’s weak data gave gilts a powerful cyclical tailwind, but political volatility and debt-sustainability concerns have not gone away.

This week’s UK calendar is much lighter after last week’s data barrage. The main domestic releases are the CBI survey on Tuesday and the Lloyds Business Barometer on Thursday. BoE speakers include Lombardelli and Breeden on Thursday and Bailey on Friday, but they are unlikely to move far from the tone set at last week’s Treasury Select Committee. The likely message remains that financial conditions have already tightened, the Iran conflict has created a complex inflation-growth trade-off, and the MPC would prefer to wait for more evidence before adjusting Bank Rate.

In the US, the key release is Thursday’s April PCE report. As with CPI, headline inflation is expected to rise faster than core because of energy, but a core rate around 3.3% y/y would still be too high for Fed comfort. The second estimate of Q1 GDP, initially reported at 2.1% q/q SAAR, will also matter for the growth side of the policy debate. Consumer confidence on Tuesday should provide an early indication of whether oil and market volatility are affecting households. In the Eurozone, confidence data, the ECB’s April meeting account and Friday’s German CPI flash will shape the debate around how far the ECB can lean into inflation risk without doing further damage to growth. Australia’s April inflation data and the RBNZ decision are also in focus, with markets assigning around a 20% chance of a New Zealand rate hike.

Overnight Headlines

• US Conducted ‘Defensive’ Attacks On Iranian Targets, Officials Say

• Trump Pushes Saudis To Recognise Israel As Part Of Iran Deal

• Trump Touts Iran Progress While Hormuz Strike Reports Show Risk

• Russia’s Lavrov Tells Rubio To Evacuate US Citizens From Kyiv

• BoJ Deputy Chief Underlines Proper Policy As Key For Bond Yields

• Japan Extra Budget Won’t Add Deficit-Covering Bonds, PM Says

• Japan Slips To World’s No. 3 Creditor Behind Germany And China

• RBNZ Set To Hold Rates And Stay In ‘Wait And See’ Mode

• China EV Exports Worldwide Rise 40% Y/Y In April

• TSMC’s Relentless Rise Powers Taiwan Market Value Above India

• Ferrari Rolls Out Five-Seat Fully Electric Car In Brand First

• Xiaomi Short Bets Hit Record On Cost Worries Ahead Of Earnings

• EU Plans To Fine Google High Triple-Digit Million Euro

• UK Could Join €4B EU Start-Up Fund This Year

• Deregulation Hands Top US And UK Banks $1.3T Opening

• Real Wages Start To Shrink In Developed Countries

FX Options Expiries For 10am New York Cut 

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

• EUR/USD: 1.1650 (EU2.22b), 1.1600 (EU2.19b), 1.1540 (EU1.04b)

• USD/JPY: 158.00 ($738.6m), 160.00 ($603m), 157.00 ($505.8m)

• USD/BRL: 5.3625 ($652.3m), 5.0525 ($552m), 5.0500 ($544.6m)

• AUD/USD: 0.7100 (AUD1.1b), 0.7200 (AUD412.1m), 0.7135 (AUD400m)

• USD/CAD: 1.2500 ($620m), 1.2450 ($445m), 1.3785 ($423.7m)

• USD/CNY: 6.7900 ($480m), 6.8250 ($401.2m), 7.2000 ($394.4m)

• EUR/GBP: 0.8675 (EU610.4m), 0.8750 (EU422.9m), 0.8700 (EU349.7m)

CFTC Positions as of May 22, 2026: 

• Speculators are making some notable moves in the futures market! They've reduced their net short position in CBOT US 5-year Treasury futures by 11,629 contracts, bringing the total down to 1,350,516. Meanwhile, there's been an increase in the net short position for CBOT US 10-year Treasury futures, which has risen by 66,885 contracts to hit 848,052.Speculators have also trimmed their net short position in CBOT US 2-year Treasury futures by 41,775 contracts, bringing the total down to 1,560,837. However, the CBOT US UltraBond Treasury futures saw an uptick in net short positions by 15,470 contracts, reaching a total of 254,464. Similarly, net short positions for CBOT US Treasury bonds futures increased by 5,820 contracts to reach 178,674.

• In the equity markets, equity fund speculators have reduced their net short position in the S&P 500 CME by 34,200 contracts, bringing it down to 384,136. At the same time, equity fund managers have cut their net long position in the S&P 500 CME by 50,929 contracts to a total of 1,005,526.

• Bitcoin's net long position stands at 2,112 contracts. Meanwhile, the Swiss franc has a net short position of -36,937 contracts, and the British pound is not far behind with a net short position of -64,307 contracts. The euro is holding strong with a net long position of 33,513 contracts, while the Japanese yen finds itself with a significant net short position of -93,905 contracts.

Technical & Trade Views

SP500

• Daily VWAP Bullish

• Weekly VWAP Bullish

• Above 7330 Target 7630

• Below 7330 Target 7250

DXY

• Daily VWAP Bearish

• Weekly VWAP Bullish

• Above 98.85 Target 99.50

• Below 98.50 Target 96.12

EURUSD 

• Daily VWAP Bullish

• Weekly VWAP Bearish

• Above 1.1710 Target 1.18

• Below 1.1650 Target 1.1550

GBPUSD 

• Daily VWAP Bullish

• Weekly VWAP Bearish

• Above 1.3445 Target 1.3885

• Below 1.34 Target 1.33

USDJPY 

• Daily VWAP Bullish

• Weekly VWAP Bullish

• Above 160 Target 161

• Below 159.50 Target 157.50

XAUUSD

• Daily VWAP Bullish

• Weekly VWAP Bearish

• Above 4700 Target 4800

• Below 4500 Target 4386

BTCUSD 

• Daily VWAP Bullish

• Weekly VWAP Bearish

• Above 79.5k Target 81k

• Below 79.5k Target 74k