Typically a Good Month for USD

May FX Seasonality Overview:

• The fifth month of the year usually sees gains for the US Dollar.
• The European currencies generally weaken across the board in May, with negative 10-year trends eclipsing positive 5-year trends.
• May typically produces modest gains for US stock markets and has proved a mixed bag for gold prices.

The beginning of the month warrants a review of the seasonal patterns that have influenced forex markets over the past several years. For May, our focus is on the trailing 5-year and 10-year performances, both of which fully capture trading during an era of rampant central bank intervention since the 2008/2009 Global Financial Crisis, as well as the ensuing feeble attempt to pullback stimulus – not dissimilar from the environment we find ourselves in during the coronavirus pandemic recovery.

As has been the case for the prior two months, unique circumstances muddle the viability of using seasonality as a guidepost to expectations around price action. Russia’s invasion of Ukraine continues, upending global commodity markets. China’s zero COVID strategy persists, despite the problems it has caused for supply chains. And now, the Federal Reserve has unleashed its first 50-bps rate hike in more than 20 years. Seasonality tendencies remain downgraded in terms of their reliability or actionability.

Monthly Forex Seasonality Summary – May 2022

Forex Seasonality in Euro (via EUR/USD)

May is a mixed month for EUR/USD, from a seasonality perspective. Over the past 5-years, it has been the fourth best month of the year for the pair, averaging a gain of +0.53%. Over the past 10-years, it has been the worst month of the year, averaging a loss of -1.18%.

Forex Seasonality in British Pound (via GBP/USD)

May is a very bearish month for GBP/USD, from a seasonality perspective. Over the past 5-years, it has been the worst month of the year for the pair, averaging a loss of -1.22%. Over the past 10-years, it has been the worst month of the year, averaging a loss of -1.53%.

Forex Seasonality in Japanese Yen (via USD/JPY)

May isa mixed month for USD/JPY, from a seasonality perspective. Over the past 5-years, it has been the fourth worst month of the year for the pair, averaging a loss of -0.61%. Over the past 10-years, it has been the fourth best month of the year, averaging a gain of +0.56%.

Forex Seasonality in Australian Dollar (via AUD/USD)

May is a bearish month for AUD/USD, from a seasonality perspective. Over the past 5-years, it has been the sixth best month of the year for the pair, averaging a gain of +0.16%. Over the past 10-years, it has been the worst month of the year, averaging a loss of -2.15%.

Forex Seasonality in New Zealand Dollar (via NZD/USD)

May isa bearish month for NZD/USD, from a seasonality perspective. Over the past 5-years, it has been the fifth best month of the year for the pair, averaging a gain of +0.67%. Over the past 10-years, it has been the worst month of the year, averaging a loss of -2.29%.

Forex Seasonality in Canadian Dollar (via USD/CAD)

May is a bullish month for USD/CAD, from a seasonality perspective. Over the past 5-years, it has been the fifth worst month of the year for the pair, averaging a loss of -0.45%. Over the past 10-years, it has been the best month of the year, averaging a gain of +1.17%.

Forex Seasonality in Swiss Franc (via USD/CHF)

May is a mixed month for USD/CHF, from a seasonality perspective. Over the past 5-years, it has been the second worst month of the year for the pair, averaging a loss of -1.40%. Over the past 10-years, it has been the best month of the year, averaging a gain of +0.89%.

Forex Seasonality in US S&P 500

May isa slightly bullish (if not disappointing) month for the US S&P 500, from a seasonality perspective. Over the past 5-years, it has been the fifth worst month of the year for the index, averaging a gain of +0.36%. Over the past 10-years, it has been the second worst month of the year, averaging a gain of +0.23%.

Forex Seasonality in Gold (via XAU/USD)

May is a mixed month for gold (XAU/USD), from a seasonality perspective. Over the past 5-years, it has been the fourth best month of the year for the precious metal, averaging a gain of +2.27%. Over the past 10-years, it has been the third worst month of the year, averaging a loss of -1.02%.

— Written by Christopher Vecchio, CFA, Senior Strategist