Source: Wall Street News UBS said that the effectiveness of the U.S. stock selling strategy in May weakened, which means that the U.S. dollar may not be able to rely on this seasonal factor to obtain significant support in the future.
The decline in U.S. core inflation has reignited expectations of interest rate cuts. Can the U.S. dollar continue its strength in April in May? Historically, May is usually a good month for the U.S. dollar.
UBS\’s Vassili Serebriakov analyst team released a research report this week saying that demand for the U.S. dollar usually begins to increase in late April and reaches a peak in mid-May. The euro, Australian dollar and New Zealand dollar usually suffer the biggest impact.
But so far, the U.S. dollar has not shown an obvious seasonal rise.
Since May, the U.S. dollar index has fallen by nearly 2% in a month.
It is worth noting that the U.S. stock market, uncharacteristically, did not appear to be selling in May.
May selling refers to a strategy used by stock investors to sell stock positions in May every year to avoid the risks of the off-season for U.S. stocks in the summer.
The volatility of the stock market has also decreased. The VIX index has returned to its low point, reversing the sharp rise in April.
UBS pointed out that moderate corporate earnings and dovish comments from the Federal Reserve may also be part of the reason for the recent decline in stock market volatility.
The deeper reason may be that the trading patterns of market participants are changing. The strategy of selling in May is gradually being abandoned by investors.
UBS observed that in the past 10 years, only U.S. stocks experienced negative returns in May 2019. The performance of the stock market in May in other years was not too bad.
For the U.S. dollar, UBS believes that the effectiveness of the U.S. stock selling strategy in May has weakened, which means that the U.S. dollar may not be able to rely on this seasonal factor to obtain significant support in the future.
Despite the weakness in the U.S. dollar, investors have bought back short yen positions in large quantities over the past week.
UBS believes that this may imply that the market has digested the threat of Japanese government intervention.
Even if there are some yen buying, as long as carry traders continue to buy dollars to obtain interest rate differentials, it will be difficult for the yen to rebound sharply against the US dollar.
As of now, the exchange rate of the Japanese yen against the US dollar is hovering around 155.
As the dollar weakens, May’s seasonal advantage is gone?
Source: Wall Street News UBS said that the effectiveness of the selling strategy of U.S. stocks in May weakened, which means that the U.S. dollar may not be able to rely on this seasonal factor to obtain significant support in the future.
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