Daily Market Outlook, July 3, 2026

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Minute — Payrolls Miss Reboots The AI Bid

Weak jobs data is lifting stocks, AI is back in vogue, Korea has swung from cliff-edge to melt-up, and gold is thriving on rate relief. But the payrolls miss is not the clear all-clear that doves want. Markets have rebounded after two days of AI-led selling because expectations for further Fed tightening have eased, not because the macro outlook has suddenly improved. The tone is calmer, the Dollar is down, and risk appetite has returned, but the labour picture remains mixed rather than decisively dovish.

Global equities rebounded sharply as investors rotated back into technology and pared expectations for further Fed hikes. MSCI’s Asia Pacific Index rose 1.8%, Nasdaq 100 futures gained 0.8%, and European equity futures pointed to a firmer open. The move reverses part of the recent AI-driven drawdown and suggests investors are still willing to buy weakness in the sector when rates pressure eases. The key distinction is that the rally is being powered by lower discount-rate anxiety as much as renewed conviction in earnings.South Korea was the standout reversal. The Kospi surged 5% after briefly flirting with bear-market territory, with semiconductors once again doing the heavy lifting. Samsung jumped 8% after reports that Anthropic is in talks with the company to produce a specialised AI chip, while SK Hynix rallied 9%. After Thursday’s violent selloff, the rebound underlines how binary the AI hardware trade has become. The same names that looked like the epicentre of valuation stress one session ago are back to being treated as the cleanest listed proxies for the AI infrastructure cycle.That does not mean the volatility warning has disappeared. The Korea move tells us positioning is still crowded, liquidity is still sensitive, and investors are still quick to chase AI-linked news flow. The Anthropic-Samsung story gives the market a fresh fundamental hook, but the broader point remains: semiconductor beta has become the pressure valve for global views on AI capex, rates and risk appetite. When yields rise, the trade cracks; when Fed pricing softens, the same trade rips.

The catalyst was the June payrolls report, which landed soft at first glance. Payrolls rose just 57k, well below the 113k consensus, while May was revised down to 129k from 172k. Two-month net revisions subtracted 74k jobs, marking not only a deceleration in hiring but also a break from the recent pattern of upward revisions. On the surface, that was enough to validate the dovish pushback against the market’s post-Warsh hawkish repricing.The composition was just as important as the miss. Healthcare and education added 69k jobs, while leisure and hospitality shed 61k roles despite expectations that World Cup-related hiring could provide a boost. Strip out the defensive sectors, and job creation across the rest of the economy was essentially flat. That makes the report look narrow, uneven and much less resilient than the headline unemployment rate suggests.The household survey was even messier. The participation rate fell sharply to 61.5% from 61.8%, while the labour force contracted by 720k. That reflected a 507k fall in employment and a 213k decline in unemployment. As a result, the unemployment rate dropped to 6.2% from 6.3%, and the U6 underemployment rate fell to 7.9% from 8.1%, but neither move looks particularly healthy. Falling unemployment driven by a shrinking labour force is not the kind of labour-market strength the Fed can lean on with confidence. Wages were more neutral. Average weekly hours held at 34.3, while wage growth ticked up to 3.5% y/y from 3.4%, matching expectations. The problem is that the real income picture is deteriorating. Real total-economy earnings have slipped into negative territory as inflation has picked up, and savings rates are also falling. That points to clear pressure on Main Street, even as the AI boom, equity gains and asset-price effects continue to support spending at the top of the income distribution. The K-shaped economy remains alive and awkward for policymakers.

For markets, the payrolls report was enough to take the edge off Fed tightening risk, but not enough to declare a clean dovish turn. The labour market trend had been improving before this release, consumption has repeatedly proven more resilient than expected, and employment components in survey data have generally looked better, with firms still expecting to add workers against a backdrop of robust demand. Lower energy prices should help, but underlying price momentum remains firm, companies are still passing through cost increases, and inventories look lean. That mix argues against getting too aggressive with rate-cut hopes. Gold captured the rates relief cleanly. Bullion rose for a third straight session, gaining as much as 1.8% to $4,195.39 an ounce as lower rate expectations boosted demand for the non-yielding asset. Precious metals are trading as the mirror image of the Fed premium: when yields soften and the Dollar loses momentum, gold quickly finds sponsorship. The move also reflects investor appetite for hedges in a market where equities are rebounding but macro conviction remains thin.Oil was quieter. Brent steadied near $72 a barrel as improved tanker flows through the Strait of Hormuz and continued US-Iran negotiations eased immediate supply concerns. The crude market is currently doing central banks a favour by reducing headline inflation pressure, but it is not providing a growth-scare signal. That combination — lower energy without a broader demand collapse — is supportive for risk assets, provided geopolitical risk remains contained.

Next week’s data calendar is unlikely to dominate markets. In the UK, construction PMI, the REC jobs report and the RICS housing survey are the main points of interest, but none looks like a natural market mover. In the euro area, Monday is busier with the Sentix survey, retail sales, PPI and German factory orders, followed by German industrial production and trade data later in the week. The releases matter for the macro backdrop, but they are unlikely to dislodge the bigger narrative around Fed pricing and AI risk appetite.The US calendar has some holiday catch-up, with ISM services and final PMIs due Monday, followed by trade, wholesale inventories, consumer credit and existing home sales. Again, most of that is second tier. The more important event is Wednesday’s Fed minutes, which should give the market a better look at the first Warsh-led FOMC discussion. The key question is how much colour the minutes provide given the heavily pared-back statement and Warsh’s clear preference for limiting guidance. If every difficult issue is effectively parked behind a taskforce, the minutes may be less illuminating than usual — but that itself would be a signal. The central-bank calendar still has pockets of interest. The Bank of England publishes its financial stability report Tuesday, while Mann speaks Monday and Breeden follows Thursday. The ECB has a steady run of speakers alongside the June minutes on Thursday. The first policy decision of the month comes from the RBNZ on Wednesday, where markets see around a 75% chance of a 25bp hike to 2.5%, marking a return to tightening.

The market heads into the weekend with a cleaner risk tone but not a cleaner macro story. The payrolls miss has revived tech, taken pressure off Fed pricing and sent gold higher, while Korea’s chip rebound shows investors are still willing to chase the AI complex when yields cooperate. But the labour report was messy rather than decisively dovish, unemployment fell for the wrong reason, real incomes are under pressure, and sticky underlying prices keep the Fed from sounding the all-clear. The rally has been rebooted, not de-risked.

Overnight Headlines

German Reform Plan Could Lift 2027 GDP Above 1%, Merz Says
Top US General For Europe Resigns As Trump Squeezes NATO Allies
US Defense Sec Hegseth Plan To Cut US Troops In Europe Shelved
Fed Seen Less Likely To Raise Rates As Job Growth Slows
Trump Says Fed’s Warsh Faces Board That’s ‘A Little Bit Hostile’
Trump Allies Double Down On Efforts To Reshape Federal Reserve
Trump Insists ‘There’s Nothing Wrong’ With His Big Crypto Gains
Japan’s Katayama Repeats Ready To Act On Yen, In Touch With US
PBoC Cuts Bond Purchases In Sign Of Wariness Over Yield Declines
China Services Gauge Fares Better Than Forecast Despite Slip
Meta CEO Says AI Agent Development Going Slower Than Expected
Kioxia Ships Samples Of Newest Flash Memory For AI Data Centers

FX Options Expiries For 10am New York Cut

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

EUR/USD: 1.1600 (EU1.78b), 1.1370 (EU1.47b), 1.1500 (EU1.35b)
USD/JPY: 161.50 ($1.36b), 160.50 ($1.13b), 160.00 ($1.08b)
AUD/USD: 0.7400 (AUD1.37b), 0.7100 (AUD1.15b), 0.6925 (AUD931.4m)
USD/CAD: 1.3890 ($350m), 1.4175 ($346.3m), 1.4075 ($300m)
USD/BRL: 6.0000 ($304.9m)
GBP/USD: 1.3200 (GBP605m), 1.3400 (GBP481m), 1.3300 (GBP370.6m)
NZD/USD: 0.5700 (NZD503m), 0.5650 (NZD400m)
EUR/GBP: 0.8600 (EU390m), 0.8725 (EU313.2m)

CFTC Positions as of June 26

Equity fund speculators have made some strategic adjustments, reducing their net short position in the S&P 500 CME by 146,022 contracts, bringing the total down to 355,669. Meanwhile, equity fund managers have taken a more bullish stance, increasing their net long position in the S&P 500 CME by 4,547 contracts, now totaling 987,977.
In the realm of Treasury futures, speculators have also been busy. They've trimmed their net short position in CBOT US 5-year Treasury futures by 48,908 contracts, resulting in a new total of 1,301,269. Similarly, the net short position for CBOT US 10-year Treasury futures has been reduced by 75,816 contracts, now standing at 835,266. However, it seems that the sentiment for CBOT US 2-year Treasury futures has shifted slightly, as speculators have increased their net short position by 48,339 contracts to reach 1,318,846.CBOT US UltraBond Treasury futures saw a slight decrease in net short positions, with a trim of 3,727 contracts down to 318,100. In contrast, there’s been an uptick in the net short position for CBOT US Treasury bonds futures, which rose by 16,492 contracts to a total of 176,043.
In the cryptocurrency arena, Bitcoin's net long position stands at a solid 3,524 contracts. Currency positions tell an interesting story as well: the Swiss franc shows a net short position of -41,094 contracts; the British pound is at -105,719 contracts; while the euro shines with a net long position of 30,158 contracts. Lastly, the Japanese yen finds itself in a net short position of -146,104 contracts.

Technical & Trade Views

SP500 - 7285 weekly bull/bear level

Daily VWAP Bullish
Weekly VWAP Bearish>Bullish
Above 7410 Target 7575
Below 7400 Target 7285

DXY - 100 weekly bull/bear level

Daily VWAP Bearish
Weekly VWAP Bullish
Above 100 Target 102.50
Below 99.40 Target 98.40

EURUSD - 1.15 weekly bull/bear level

Daily VWAP Bullish
Weekly VWAP Bearish
Above 1.15 Target 1.1780
Below 1.1490 Target 1.1270

GBPUSD - 1.33 weekly bull/bear level

Daily VWAP Bullish
Weekly VWAP Bearish>Bullish
Above 1.34 Target 1.35
Below 1.33 Target 1.3050

USDJPY - 160.50 weekly bull bear level

Daily VWAP Bearish
Weekly VWAP Bullish>Bearish
Above 162 Target 163.75
Below 159Target 157.95

XAUUSD - 4100 weekly bull bear level

Daily VWAP Bullish
Weekly VWAP Bearish
Above 4200 Target 4500
Below 4150 Target 3569

BTCUSD - 60.5 weekly bull bear level

Daily VWAP Bullish
Weekly VWAP Bearish
Above 67.2k Target 70.5k
Below 60.5k Target 52.2k