Heat is Off

July 20, 2026

Elias Haddad

Oil rebound loses steam. Chip rout cools. Dollar mixed.

US data calendar is empty. Canada June CPI the highlight.

UK chancellor pick to set the tone for gilts and GBP.

Check-out our Drivers for the Week Ahead for the upcoming key market shaping themes.

Brent crude oil prices rebounded briefly above $90 a barrel after bottoming out near $70 earlier this month. The longer the disruption to Strait of Hormuz traffic, the greater the upside risk to energy prices and inflation. The IMF warned that crude oil inventories, which have partly compensated for the decrease in oil flows through the Strait, are now getting closer to multiyear lows and could reach stress levels should supply disruptions persist or hoarding gather steam.

Global equity markets steadied as the semiconductor selloff cooled. Nevertheless, the release of Kimi K3, which delivers frontier-level AI performance at a much lower cost and can be openly downloaded and modified by users, raises doubts about the sustainability of the ongoing AI capital expenditure boom. As such, equity markets are likely to face renewed turbulence.

USD is mixed with the DXY (USD index) holding above last week’s lows. Today’s US data calendar is empty, keeping moves in USD and US yields contained.

CANADA

USD/CAD is firmer above key support at 1.4000. Canada June CPI is up next (1:30pm London, 8:30am New York). Headline CPI is seen at 2.9% y/y vs. 3.2% in May on lower gasoline prices, core CPI (ex. food & energy) is expected at 1.7% y/y vs. 1.6% in May, and core CPI (average of trim and median) is projected to remain at 2.05% for a third straight month.

Core inflation remains anchored near the Bank of Canada’s (BOC) 2% target, supporting an extended pause which is a headwind for CAD. The swaps curve price in 80% odds of a 25bps rate hike by year-end and 50bps of tightening over the next twelve months to 2.75% - the mid-point of the BOC’s estimated neutral range (2.25%-3.25%).

Andy Burnham is set to become Britain’s fifth prime minister in just four years today, its seventh since the Brexit vote ten years ago. Markets will focus on his pick for chancellor. Shabana Mahmood is expected to get the job, a choice that would be viewed as fiscally more credible than some of the alternative candidates.

Regardless, the prospect of higher spending and borrowing under a Burnham-led government is a drag on GBP and gilts. Meanwhile, the market is pricing the BOE to lift the policy rate into restrictive territory (above 4.00%) even as the economy operates well below potential. That raises the likelihood of a downward adjustment to BOE rate expectations against GBP.

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