Investing.com – The US dollar usually has a good month in May, according to UBS analysis, but this year appears to be different.
“May has been a historically positive month for the dollar: our seasonal indicator suggests that US dollar supply typically rises in late April and peaks around mid-May, with the euro, Australian dollar and New Zealand dollar typically being the most affected,” say analysts at the Fed. . The Swiss bank said in a note dated May 13.
However, the dollar has seen little seasonal support so far, UBS said, which is intuitively consistent with the lack of a “May sell” trend in stocks yet.
While benign corporate earnings and the FOMC's dovish turn are likely the main explanation, we also note that negative May stock returns have actually become less prevalent in the past 10 years, with only 2019 being negative.
“More specifically for FX, this is also an indicator that the market may already be long the US dollar for positive carry and as a defensive hedge,” UBS added. “This prevents the kind of disruptive, positive risk unwinding of the US dollar that may have occurred in past episodes, when the dollar was more of a risk taker.”