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May 04 - 05:55 AM

GBP/USD - COMMENT-GBP/USD Usually Falls In May; Expect A Bigger Slump

By Martin Miller  —  May 04 - 03:55 AM

FX traders should beware of GBP/USD's strong tendency to drop in May, especially as a number of factors point to further pound weakness.

GBP/USD has fallen in May in 17 of the last 22 years, or 77% of the time.
Seasonality should not be considered in isolation, but it's a useful tool combined with other factors.

In recent weeks the pound has fallen sharply as investors have piled into dollars in expectation that the Federal Reserve will raise rates faster than other central banks. nL2N2WV0JV

The market is fully pricing in a 50-basis pip Fed hike on Wednesday, while the Bank of England is expected to hike rates 25 basis pips for the fourth straight meeting on Thursday. nL2N2WU00G

In April GBP/USD saw the biggest one-month drop since October 2016, highlighting the overall bearish market structure.
There is a good chance cable closes May under the 1.2497 Fibonacci level, a 61.8% retrace of the 1.1413 to 1.4250 (2020 to 2021) rise, which would then put the 1.2083 Fibo (76.4% retrace of the same gain) in focus.

For more click on FXBUZ


Monthly Chart: Click here

GBP/USD May Seasonality Chart: Click here

Source:
Refinitiv IFR Research/Market Commentary

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