Daily Market Outlook, June 12, 2026 

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Minute – Peace Premium Powers the AI Rebound

 “The peace premium is powering a relief rally. Lower oil is cooling inflation fears, Fed hike bets are being pushed further out, and AI dip-buyers are piling back in ahead of today’s much-hyped SpaceX IPO. But the all-clear hasn’t landed yet. Next week’s central bank and political calendar is packed: the ECB has already shown it remains alert to second-round effects, the BoJ is still expected to hike, the BoE is likely to hold, and Warsh’s first major Fed communication will decide how far markets can stretch the de-escalation trade. In the UK, the Makerfield by-election adds another layer of fiscal and gilt-market risk.”

Global equities are ending the week with a powerful relief rally as markets price a rising chance of a US-Iran diplomatic breakthrough. President Trump said the US is nearing a deal with Tehran, raising hopes that a conflict which has driven volatility for more than three months could be moving toward resolution. The MSCI Asia Pacific index jumped 3.5%, its largest gain in two months, while South Korea’s KOSPI surged 8.4% as investors rushed back into AI and semiconductor names. European markets are set to open around 1.8% higher, and US futures point to further gains after Thursday’s rally. Oil is the clearest expression of the shift in risk premia. Brent has fallen another 2% to around $88.50/bbl after Trump softened military threats and pointed to high-level talks with Iranian officials. A formal signing ceremony could reportedly take place as soon as this weekend in Europe, with JD Vance expected to attend. The market is moving from pricing escalation risk to pricing de-escalation relief. That does not remove geopolitical uncertainty, but it materially reduces the immediate threat of a sustained energy shock.

Rates markets have responded accordingly. Treasury yields are steady, with the US 10-year around 4.46%, while short-term Fed pricing has moved in a less hawkish direction. Traders no longer fully price a 25bp Fed hike by December, with attention shifting instead toward a possible move in Q1 2027. The logic is straightforward: if the oil risk premium fades, the inflationary consequences of the conflict look less threatening, and the Fed has less reason to react pre-emptively to energy-driven price pressure. That matters because the recent macro setup had become uncomfortable. Strong US payrolls had raised the risk that labour-market slack was being absorbed just as oil prices were rising. That combination made second-round inflation effects a real policy concern. Now, with Brent back below $90/bbl, the most acute version of that story is easing. Equities are responding not only to lower oil, but also to the reduced probability of a more hawkish global central-bank reaction. AI remains the main beneficiary of the relief rally. Korea’s outsized rebound shows that investors still see semiconductors as the highest-beta expression of improving risk appetite. The recent selloff demonstrated that AI valuations are no longer immune to macro stress, but today’s move confirms that dip-buying demand remains powerful when geopolitical and rates pressures ease. The theme is bruised, not broken.

In the UK, April GDP contracted by 0.1% m/m, in line with consensus. The monthly headline looks soft, but the broader picture is more nuanced. GDP expanded 0.7% on a three-month-over-three-month basis in the three months to April. Because of the arithmetic of the Q1 profile, even if GDP is flat in May and June relative to April, Q2 would still register growth of around 0.2% q/q. That would be slightly above the BoE’s April Monetary Policy Report projection, as was the 0.6% q/q Q1 outturn.So, strictly speaking, UK activity may be running a little firmer than the BoE expected. But it does not feel like a large enough surprise to shift MPC votes. Inflation data remain more important in the near term. There are also erratic details in the GDP release. The ONS noted that cancelled sporting events in the Middle East had affected UK businesses, while employment activities fell a further 2.6% m/m. That latter point is more relevant for policy because it does not suggest an imminent labour-market improvement. The short-term UK growth narrative remains one of moderation. Whether because of ONS seasonal-factor issues, fading momentum after Q1, or the lagged effects of the energy shock, growth looks set to slow materially from the 0.6% q/q pace recorded at the start of the year. That helps explain why the BoE is still likely to hold next week. The committee appears divided, but the balance looks skewed toward wait-and-see, with a 7-2 vote to keep rates unchanged the most likely outcome.

The ECB delivered no surprise yesterday, raising policy rates by 25bps as expected. Lagarde struck a balanced tone, emphasising that the whole Governing Council backed the move. The ECB remains concerned about geopolitical uncertainty, elevated energy prices and second-round inflation risks. The rise in services prices in May was highlighted as possible evidence that second-round effects are already visible.The forecasts reflected that concern, with inflation revised higher across the horizon and growth expectations only mildly lower for this year and next. The ECB appears to judge this shock as less damaging than the previous energy episode, partly because domestic demand remains resilient and fiscal spending is higher. Unemployment forecasts were lowered across the horizon, reinforcing the idea that the labour market is not weakening enough to offset inflation risk decisively. Even so, the ECB is not signalling the start of a long aggressive tightening cycle. The inclusion of a milder scenario in its analysis helped balance the inflation focus and showed that policy remains pragmatic. Some further modest tightening looks appropriate if demand stabilises, but the ECB starts from a relatively good position. It should not need an extended cycle to re-anchor inflation expectations.

Next week is packed with central-bank decisions. The BoJ is expected to hike by 25bps on Tuesday, even with Governor Ueda absent due to hospitalisation. The RBA on Tuesday, the Riksbank on Wednesday, and Norges Bank and the SNB on Thursday are expected to pause. The Fed on Wednesday and the BoE on Thursday are also expected to hold.The common issue across central banks is how to treat an energy shock that may now be fading but has already lifted inflation risks. Doves argue that the tightening in financial conditions already seen should be enough to offset temporary price effects, especially if energy prices remain in a higher range rather than continuing to rise. Weaker activity data in Europe support that view. Hawks focus instead on second-round effects and inflation expectations, arguing that modest early tightening can prevent a more costly adjustment later. The ECB sits closest to the hawkish end of that spectrum, alongside the RBA and Norges Bank. Both the RBA and Norges had already been uncomfortable with their domestic inflation trajectories, and both hiked at their previous meetings. The BoJ remains a reluctant tightener, but policy was too accommodative heading into the latest inflation problem.

The Fed is next week’s key meeting. With Powell gone, markets will be watching how new Chair Warsh frames the reaction function. He has already suggested changes to Fed guidance and may be less attached to detailed SEP projections. He has also highlighted trimmed-mean inflation as a steadier measure to track, which could allow some look-through of an energy-driven rise in headline inflation. But stronger labour data, buoyant asset markets and firm consumption complicate that argument. Warsh therefore has to balance three forces: the risk of energy-driven inflation, evidence of a stronger labour market, and his view that AI and productivity gains may be disinflationary over time. The decision itself is unlikely to surprise — rates should be left unchanged — but the communication matters. Markets will be looking for whether this is a genuine shift away from forward guidance or simply a less dovish version of the old Fed framework.

The UK also has a politically important week ahead. The Makerfield by-election takes place on Thursday, and by Friday’s open markets should know whether Andy Burnham is returning to Westminster to challenge Starmer. Polls suggest he will win comfortably. The relevance for gilts is that this is not a routine by-election; it is being treated by markets as a potential trigger for a leadership challenge and a different, potentially less market-friendly, fiscal strategy. UK data will frame the BoE trade-off. CPI is due Wednesday, followed by the labour-market update on Thursday. The positive surprise in last month’s inflation data is likely to prove short-lived, with headline inflation expected to nudge back toward 3.0% and core inflation likely to show a similar uptick. Although revisions may reduce the severity of April’s decline in payrolled employment, surveys continue to point to weak hiring. If wage growth decelerates at the same time, that would help temper MPC hawks’ concerns about second-round effects. Friday then brings GfK consumer confidence, public-sector borrowing and retail sales.

The eurozone calendar is lighter, with industrial production and trade on Monday, ZEW on Tuesday and the final May CPI print on Wednesday. The main risk is whether the final inflation number is revised higher as more country-level detail is incorporated. After the ECB’s hike, anything that reinforces the second-round inflation story would strengthen expectations for another modest move later in the year. In the US, it is a shortened week because of Juneteenth, but the data calendar is still active. Empire manufacturing and industrial production arrive Monday, import and export prices on Tuesday, retail sales on Wednesday, and the Philadelphia Fed survey and TIC data on Thursday. Retail sales will be especially important because the consumer has kept spending despite higher gasoline costs, partly by dipping into savings. But that momentum is not guaranteed if the Iran shock lingers, especially with real income growth shifting back into negative territory. Renewed hiring momentum and wealth effects among higher-income households provide some offset, but the distributional picture remains uneven.

Overnight Headlines

• Trump Claims Iran Deal Nears, Tehran Says No Final Decision Made

• Trump Cancels Strikes Against Iran Planned For Thursday Evening

• Trump: ‘Great’ Iran Settlement Would Reopen The Strait Of Hormuz

• Trump Can Enforce Section 122 Tariffs Until Appeals Court Rules

• Energy-Driven Inflation Keeps US Hike Risks Alive Ahead June FOMC

• BoJ Set To Hike Rates To A 31-Year High Next Week

• Ueda’s Illness Complicates BoJ’s Landmark 1% Rate Decision

• WB Cuts Global Growth Outlook To 2.5% On Further Downside Risks

• Asia Energy Crisis At ‘Worst-Case Scenario’, ADB Warns

• UK PM Starmer Appoints Dan Jarvis As New UK Defense Sec

• EZ Defence Stock Rally Goes Into Reverse On Funding Concerns

• SpaceX IPO Draws At Least $5B Order From BlackRock

• Nvidia Hires Veteran Lobbyist Bruce Andrews To Lead Govt Affairs

• Adobe’s CFO Departs, Leaving Company Seeking Top Executives

• Lennar Cuts FY Target, Citing ‘Stubborn’ Housing-Market Headwinds

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 (EU3b), 1.1700 (EU1.47b), 1.1825 (EU1.23b)

• USD/JPY: 159.00 ($1.41b), 158.00 ($625m), 162.04 ($503.6m)

• USD/MXN: 18.00 ($1b), 16.00 ($1b)

• AUD/USD: 0.7080 (AUD424.2m), 0.7150 (AUD383.4m), 0.7000 (AUD340m)

• USD/CNY: 6.7000 ($600m), 6.8000 ($598.5m)

• USD/BRL: 5.1600 ($351.2m)

• EUR/GBP: 0.8675 (EU487.2m), 0.9075 (EU462.3m), 0.9000 (EU314.6m)

• NZD/USD: 0.5820 (NZD340.6m), 0.6050 (NZD325.6m)

• USD/CAD: 1.3840 ($400m)

CFTC Positions as of June 5, 2026: 

• In a notable shift in market dynamics, equity fund speculators have ramped up their net short position on the S&P 500 CME, adding a hefty 38,113 contracts to bring their total to 485,582. Meanwhile, equity fund managers have trimmed their net long position by 23,807 contracts, now sitting at 985,207.

• Turning to the Treasury futures market, speculators have also increased their net short positions across various maturities. The CBOT US 5-year Treasury futures saw an increase of 46,091 contracts, pushing their total to 1,369,218. The 10-year Treasury futures experienced a rise of 41,621 contracts, reaching 829,575. Not to be left out, the net short position for the CBOT US 2-year Treasury futures surged by 94,942 contracts, totaling 1,350,188. Additionally, the net short position for the CBOT US UltraBond Treasury futures grew by 27,868 contracts to 287,710. In contrast, speculators have slightly reduced their net short position in CBOT US Treasury bonds by 39,398 contracts, now standing at 159,853.

• On the cryptocurrency front, Bitcoin maintains a net long position of 2,458 contracts. 

• In the currency market, the Swiss franc is showing a net short position of -32,909 contracts, while the British pound has dipped to a net short of -52,218 contracts. Conversely, the euro is in a more favorable position with a net long status of 48,866 contracts. The Japanese yen continues to struggle with a significant net short position of -129,567 contracts.

Technical & Trade Views

SP500

• Daily VWAP Bullish

• Weekly VWAP Bearish

• Above 7550 Target 7700

• Below 7480 Target 7200

DXY

• Daily VWAP Bearish

• Weekly VWAP Bullish

• Above 99.20 Target 100.30

• Below 98.80 Target 98.40

EURUSD 

• Daily VWAP Bullish

• Weekly VWAP Bearish

• Above 1.1710 Target 1.18

• Below 1.1580 Target 1.1450

GBPUSD 

• Daily VWAP Bullish

• Weekly VWAP Bearish

• Above 1.3465 Target 1.3525

• Below 1.3425 Target 1.3150

USDJPY 

• Daily VWAP Bullish

• Weekly VWAP Bullish

• Above 159.30 Target 162.20

• Below 159Target 157.95

XAUUSD

• Daily VWAP Bearish

• Weekly VWAP Bearish

• Above 4550 Target 4700

• Below 4500 Target 4100

BTCUSD 

• Daily VWAP Bullish

• Weekly VWAP Bearish

• Above 66.5k Target 72k

• Below 66k Target 52.2k