Investing.com – According to UBS analysis, the US dollar usually enjoys the month of May, but this year seems to be different.
“May is historically a positive month for the dollar: our seasonal indicator suggests that the bid for the USD typically picks up in late April and culminates around mid-May, with the EUR, AUD and NZD typically hit the hardest,” say analysts at Dat the Swiss bank reports in a note dated May 13.
However, the dollar has seen little seasonal stimulus so far, UBS said, which intuitively fits with a lack of “May selling” trend in equities so far.
While favorable corporate earnings and a muted FOMC shift have likely been the main explanation, we also see that negative stock returns in May are actually less common over the past decade, with only 2019 being negative.
“More specifically for currencies, this is also an indication that the market may already be long USD for positive carry and as a defensive hedge,” UBS added. “This avoids the kind of disruptive and USD-positive risks that occurred in previous periods when the dollar was more of a risk financier.”
