Analysis from UBS sees the US dollar usually enjoying strong gains in May, but this year looks a little different.
"May has historically been a positive month for the US dollar: our seasonality indicators suggest that demand for the USD usually picks up in late April and peaks around mid-May, with EUR, AUD and NZD usually the most affected," said analysts at the Swiss bank, in a note dated May 13.
However, the US dollar has seen little encouragement so far, UBS said, which is intuitively consistent with the lack of a 'sell in May' tendency in equities so far. While good corporate earnings and the FOMC's dovish swing may be the main explanation, we also find that negative equity returns in May have actually become less common over the past 10 years, with only 2019 being negative.
On the other hand, traders on Tuesday reduced bets that the Federal Reserve will make its first interest rate cut in September after a government report showed wholesale prices rose more than expected in April.
After Tuesday's PPI report, traders saw around a 60% chance of a rate cut in September, compared with the 64% probability seen before the report.
