May Marches In

By Adam Button

Risk trades to a step back to end April but it was a strong month overall. We will have a look at May seasonal patterns. The Canadian dollar was the top performer last week while the yen lagged. CFTC positioning data showed the market slowly warming up to CAD.

It is a BUSY WEEK for GBP with the Bank of England meeting raising the debate over the tapering of asset purchases and Scottish Elections, with the latest speculation on Scotland Independence.

Economic data continued to point to economic strength on Friday as the expectations component of the UMich consumer sentiment survey was strong while the income line in the PCE reporta rose 21.1% in March on stimulus payments.

Month end flows may have led to some profit taking but a study showing a single vaccine shot may not offer adequate protection from covid variants also weighed.

The new month kicks off with some strong seasonal patterns. Cable is a particularly notable one – it’s fallen in May for 11 straight years. We may have seen some front-running of that with Friday’s drop down to 1.3810.

Another theme is dollar strength. At the start of the year, everyone was a dollar bear and that turned out to be a terrible idea, especially after the Georgia primary. The dollar gave back some ground in April but May has been the best month for the DXY for the past 20 years.

On the soft side, it’s the second-worst month for the kiwi. For equities the traditional ‘sell in May and go away’ doesn’t hold up. The S&P 500 has risen in May in 7 of the past 8 years.

CFTC Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by – long by +.

EUR +81K vs +81K prior

GBP +29K vs +25K prior

JPY -49K vs -60K prior

CHF -1K vs +2K prior

CAD +16K vs +13K prior

AUD -1K vs -2K prior

NZD +7K vs +4K prior

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