Eye on Motionless July & Real Yields

Half the year is done with the Canadian dollar at the top of the leaderboard and the yen at the bottom. Some of that unwound on Tuesday despite a positive risk backdrop in a hint that flows might be overwhelming fundamentals at the moment. We take a closer look at July seasonal patterns. The US June ADP survey is up next, exp 600K from prev 978K, more on this below. 15 mins later, Canada's April GDP follows.The chart below shows gold struggles to hold above the crucial support of 1760/3, as real yields trade in an increasingly narrow range, paving the way for a potential breakout. 

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Comments from Fed governor Waller yesterday stating his preference for start thinking about tapering helped drive down metals again earlier this session. 

We got more evidence of a strong recovery building as we ramp up for a big finish to non-farm payrolls week. The June US consumer confidence report from the Conference Board was at 127.3 compared to 119.1 expected with the 'present situation' component jumping. Deeper down in the report, the 'jobs plentiful' metric also rose to the highest since 2000 in another sign that it's more a matter of 'when' US jobs come back than 'if'.

The Fed's Barkin pointed to Aug and Sept as months when he expects to see strong hiring because of the expiration of jobless benefits and schools reopening.

For July, the risk backdrop continues to improve with the S&P 500 closing higher for five straight days, hitting a new record. In the month ahead, the seasonals continue to be positive. July is the fifth best month on average over the past 20 years but is second best in recent years as its ripped off 6 straight gains in July and 10 in the past 12.

More broadly, there are much fewer seasonal signals in July. In fact, the average move in the Dollar Index in the past 20 years is precisely 0%. There is some fractional strength in the commodity currencies but not as much as equities would indicate.

The day ahead on the economic calendar is a busy one. The ADP jobs report is up at 1215 GMT/13:15 London/16:15 Dubai but note that its recent track record is dismal. Canadian GDP for April will be released at the same time but CAD risks may be skewed upwards on the data because a soft report will be dismissed due to lockdowns.

Comments from Fed governor Waller yesterday stating his preference for start thinking about tapering helped drve down metals again earlier this session.