Daily Market Outlook, May 14, 2026 

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Minute - Trump Xi Calm Meets UK Political Risk

Asian equities are struggling to extend the rally cleanly despite a constructive tone from the Trump-Xi summit. MSCI Asia Pacific is up just 0.1% after earlier gaining 0.8%, while mainland China has faded, with the CSI 300 down 1.3% and Shanghai off 1%, despite both leaders leaning into cooperative language. Trump talked up a “fantastic future” for US-China relations, Xi emphasised cooperation over rivalry, and the US business delegation — including Nvidia’s Jensen Huang and Tesla’s Elon Musk — helped reinforce the market-friendly optics. The offshore yuan’s 11th straight advance, its longest winning run since 2017, suggests FX markets are giving the diplomacy more credit than Chinese equities are.

The AI trade remains the main offset to broader macro caution. A regional technology index rose as much as 2.3% to a record high, Nasdaq futures are up 0.3%, and Cisco’s 20% after-hours surge on stronger sales guidance adds to the sense that AI-linked capex momentum is still filtering through corporate earnings. Europe is set for a firmer open, with futures up around 0.7%. Rates are quieter despite lingering inflation concerns, with the US 10-year yield down 1bp to 4.46% and Australian bonds also firmer. The message is familiar: investors are willing to look through higher inflation risk so long as AI earnings momentum remains credible.

UK GDP delivered a better Q1 headline, but it is already old news for markets. Growth printed at 0.6% q/q, in line with consensus and 0.1ppts above the BoE’s April MPR forecast, led by services and supported by broad-based expansion across 11 of 14 sub-sectors. Retail and wholesale were the standout, up 2% q/q, consistent with firm household consumption of 0.6% q/q. But the focus should be on what comes next. Q1 largely predates the energy shock from the Middle East conflict, and the BoE is already looking for Q2 growth to slow to 0.1% q/q. The RICS housing survey reinforces that caution, with a net -34% of agents reporting lower prices in April versus -25% expected, pointing to a sharper confidence hit in rate-sensitive parts of the economy.

For gilts, politics remains the bigger risk than backward-looking GDP. The market has already been sensitive to leadership headlines because a post-Starmer contest could bring a more expansionary fiscal stance. A useful way to frame the risk is to combine prediction-market odds with Survation political-positioning scores: on that basis, the likely challenger pool suggests a clear leftward drift. Burnham, Rayner and Miliband — the three most left-leaning names in the pool — account for around 47% of the implied probability of succeeding Starmer this year, while Reeves, Jones and Phillipson account for only around 1%. Streeting is the more centrist market-friendly option, but if a contest is now imminent, the question for gilts is not whether Labour shifts left, but by how much — and how quickly that translates into fiscal credibility risk..

Overnight Headlines

• Trump Meets Xi In China For Summit As Tensions Over Iran Simmer

• Xi Tells Trump That US And China Are ‘Partners Not Rivals’

• Sec Rubio: US Wants China To Press Iran To Change Course In Gulf

• Iran War Gives Xi The Chance To Rekindle Gas Sales With Trump

• Japanese Crude Tanker Emerges Outside Hormuz In Rare Transit

• IEA Flags Greater Oil Volatility Ahead; OPEC Cuts Demand Forecast

• Global Oil Shock From Iran War May Require ECB Hikes, Lane Says

• Kevin Warsh Is Confirmed As Fed Chair In 54-45 Senate Vote

• Fed’s Collins Says She Could Envision The Need For Rate Hikes

• Fed Is ‘Dead Serious’ About Getting Inflation Down, Kashkari Says

• Bond Investors Flee As Inflation Worry Sends Yields To 2026 High

• Japan’s 30-Year Bond Sale Demand Stronger Than 12-Month Average

• BoJ’s Masu: Rate Hike Desirable At ‘Earliest Stage Possible’

• BoE’s Mann Sees Risk Rate Hikes Could Rock Gilt Market

• UK House Price Gauge Falls To Lowest Since 2023, RICS Says

• UK PM Starmer Prepares To Fight Leadership Bid By Streeting

• OpenAI Floats Idea Of Global AI Governance Body With US, China

• AI Bond Binge Overwhelms Wall Street, Pushing Alphabet Overseas

• Cisco Gives Better-Than-Anticipated Forecast, Plans To Cut Jobs

FX Options Expiries For 10am New York Cut 

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

• EUR/USD: 1.2300 (EU1.91b), 1.1700 (EU1.11b), 1.1900 (EU1.32b)

• USD/JPY: 155.00 ($2.5b), 156.00 ($2.01b), 158.00 ($1.09b)

• AUD/USD: 0.7350 (AUD1.69b), 0.7200 (AUD802.9m), 0.7150 (AUD609.8m)

• USD/BRL: 5.1500 ($1.51b), 5.3500 ($964.9m), 4.9000 ($637m)

• GBP/USD: 1.3570 (GBP1.22b), 1.3300 (GBP607.4m), 1.3100 (GBP309.6m)

• USD/CNY: 6.7930 ($1.24b), 6.7500 ($410m), 6.7800 ($400m)

• USD/MXN: 17.55 ($532.2m), 17.31 ($328.3m), 17.25 ($300m)

• USD/CAD: 1.3675 ($671.6m), 1.3650 ($418.6m), 1.3715 ($342.3m)

• EUR/GBP: 0.8705 (EU670.9m)

• USD/KRW: 1441.70 ($640m), 1399.40 ($540m)

• NZD/USD: 0.5970 (NZD577.9m), 0.6050 (NZD401.7m), 0.5950 (NZD306.5m)

CFTC Positions as of May 8, 2026: 

• Equity fund speculators have made some notable adjustments recently, reducing their net short position in the S&P 500 CME by 6,871 contracts, bringing the total down to 389,571. Meanwhile, equity fund managers are feeling more optimistic, increasing their net long position in the S&P 500 CME by 14,772 contracts, now totaling 1,013,955.

• In the realm of Treasury futures, speculators have also been active. They've cut their net short positions in CBOT US 5-year Treasury futures by a significant 100,106 contracts, now standing at 1,421,299. The CBOT US 10-year Treasury futures saw a reduction of 23,868 contracts in net short positions, which now sits at 815,269. The CBOT US 2-year Treasury futures experienced a trim of 35,934 contracts, leaving a net short position of 1,673,329. Additionally, speculators reduced their net short position in CBOT US UltraBond Treasury futures by 34,850 contracts to a total of 259,435. However, there was an increase in the net short position for CBOT US Treasury bonds futures by 59,287 contracts, bringing it to 172,942.

• In the cryptocurrency market, Bitcoin's net long position has reached 1,441 contracts. 

• On the currency front, the Swiss franc has a net short position of -34,521 contracts, while the British pound's net short position is -63,908 contracts. The euro is showing strength with a net long position of 32,202 contracts, whereas the Japanese yen holds a net short position of -61,738 contracts.

Technical & Trade Views

SP500

• Daily VWAP Bullish

• Weekly VWAP Bullish

• Above 7340 Target 7460 - TARGET HIT WAITNG FOR NEW PATTERN

• Below 7290 Target 7200

DXY

• Daily VWAP Bullish

• Weekly VWAP Bearish

• Above 98.85 Target 99.50

• Below 98.50 Target 96.12

EURUSD 

• Daily VWAP Bearish

• Weekly VWAP Bullish

• Above 1.1785 Target 1.1850

• Below 1.1750 Target 1.16

GBPUSD 

• Daily VWAP Bearish

• Weekly VWAP Bullish

• Above 1.3445 Target 1.3885

• Below 1.34 Target 1.3320

USDJPY 

• Daily VWAP Bullish

• Weekly VWAP Bearish

• Above 160 Target 161

• Below 159 Target 152

XAUUSD

• Daily VWAP Bearish

• Weekly VWAP Bearish

• Above 4600 Target 5000

• Below 42700 Target 3600

BTCUSD 

• Daily VWAP Bearish

• Weekly VWAP Bullish

• Above 79k Target 86k

• Below 78k Target 76k