Some August Seasonals
US GDP fell a record 32.9% on an annualized basis in Q2 but as we warned yesterday, that was slightly better than the 34.5% consensus. Initial jobless claims were close to the consensus but remain stubbornly high at 1434K. Continuing claims also missed the 16.2m consensus with a rise to 17.0m. That comes with emergency unemployment benefits set to run out today.
Congress may be shifting towards a short-term extension of those benefits and that's something to watch in the day ahead.
Another thing to watch is the turn of the calendar. August is a poor month for risk trades historically (meaning indices usually selloff); it's the weakest month over the past decade for the S&P 500 and Nikkei. It's also a strong one for bonds (that's negative for yields). US 5-year rates hit a record low Thursday and 10s are now flirting with the April low. It's held a number of times since the pandemic and a break below 0.54% would pave the way to return to the March sell-everything low of 0.30%.
With the weak risk averse tone, it's no surprise that August is a negative month for the commodity currencies. It's the softest for AUD/USD and NZD/USD second-softest for the loonie. The Australian dollar has easily been the best performer since mid-March, up more than 17%. Be wary of a pause or worse.
Another strong seasonal trend is in sterling where it's the second-weakest month in GBP/USD and the strongest month for EUR/GBP. Cable has been on a sparking run to 1.31 but there is some resistance at the 1.32 and that will be a tough test after the one-way trip from 1.25.
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