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FOREX: BofA Research notes that "GBP seasonality has been a topical theme
particularly at this time of the year. April has historically been the most +ve
for GBP/USD. However, as much as April is a +ve month for GBP, driven in large
part by the new UK tax year & corporate div repatriation of overseas income, May
is a month where USD strength is the main driver for GBP/USD under-performance.
May is the worst month for GBP/USD with an average decline of 2.3% since 2010...
However, whilst the seasonality in GBP/USD through May looks pervasive, we find
that all G10 currencies broadly underperform through the month. The consistency
in the under-performance reveals two findings: a) AUD, NOK & other high beta
currencies weaken the most; b) EUR under-performs more than GBP. This pattern of
FX performance strongly suggests that May is a risk-off month. As an aside, we
note that FX vol. (using the JPM VXY index as a proxy) rises on avg & has done
so particularly in the last couple of years. May seasonality is consistent with
our constructive near-term view towards the USD... The only currencies that may
prove immune to the broad based rally in USD are CHF & JPY which could buck
usual seasonal trends in an unprecedented market environment."
MNI London Bureau | +44 0203-865-3809 |
MNI London Bureau | +44 0203-865-3809 |

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