May was a strong month for the US dollar, which is in line with seasonal history. It's the best month for the dollar and added to that this year, with the dollar index rising 2.5%.
Will the seasonals work again in June?
The old adage in markets is 'sell in May and go away'. That applies to selling equities and it has some backing as June is the second-weakest month on the calendar, after September. The S&P 500 fell 8.7% last June as the market reevaluated the path of inflation and Fed policy but before that it had climbed in six consecutive years in June.
At the moment, the market needs some broadening beyond stretched AI stocks to maintain momentum but that won't come unless data cools and the Fed hits a ceiling.
More broadly, June is historically the second-most challenging month for the MSCI world index, which has seen an average drop of 0.55% since 2000. China and the UK are already struggling and June is the worst performing month for their benchmark indexes over the last two decades.
Australian and New Zealand Dollars to Bounce?
Although temperatures are dropping in the southern hemisphere, the AUD and NZD may warm up. Both currencies fell in May and AUD/USD is on a four-month losing streak as central banks lose their appetite for hikes Historical trends show June as a positive month for AUD, marking it as its second-best month in the last 20 years. The same trend applies to NZD/USD, which sees an average increase of 0.85%.
Euro rebound
May is a weak seasonal month for the euro and that was true again this year as it fell to 1.0675 from 1.1020. In June, the picture improves with an average gain of 0.6% over the past 20 years. Last year, the euro sank on energy and war fears but it's risen in June in 8 of the past 12 years.
Dollar Days Aren't Here
Dollar Days might be back at your favourite food restaurant but they're not in the FX market in June, as it's the third-worst month for the US dollar. Perhaps we got a taste of that today with a soft regional manufacturing survey and a hint from two Fed officials that they don't plan to hike in June. The big kickoff to the month comes with Friday's non-farm payrolls and that will set the tone. It's beaten the consensus for an astonishing 13 months in a row; time to end the streak?
Last Chance for the Oil Bulls
Oil has had a tough week, falling 8% and with China slowing and OPEC likely to keep output unchanged, there isn't much hope aside from H2 inventory tightening. Last year on June 7, the price of WTI peaked at $130.50 but reversed to finish the month lower at $105.76. It's now trading at $67.95, which is below where it was at the start of 2022. June is the final stretch of a three-month period starting in May with strong seasonal tailwinds. Needless to say, those tailwinds haven't offered much help this year.
