Written by David Rodriguez, Quantitative Strategist
The “September Effect” on the S&P 500 and broader risky assets has typically led stocks lower on the month, and a continuation in said tendency would likely push the safe-haven US Dollar and Japanese Yen higher through the foreseeable future. Indeed, the month of September is historically the worst month of the year for the S&P. It is interesting to note that the US Dollar Index has likewise historically fallen in September, but a shift in market dynamics suggests that this is less likely in the month ahead.
USDJPY
The Japanese Yen has likewise shown an impressive tendency to gain against the US Dollar through the month of September. In fact, the US Dollar/Japanese Yen currency pair has fallen in September through 12 of the past 21 years—an average of almost 200 pips. Yet it serves to note that said tendency is heavily weighted towards the late 1980’s and early 1990’s when the USDJPY was in a fairly substantial downtrend. That being said, any downward pressure in the S&P 500 and major global stock markets would likely benefit the Japanese Yen. Viewed from that standpoint, seasonality suggests USDJPY losses are likely.
GBPUSD
The British Pound has shown a seasonal tendency to rise in the month of September, having rallied in 16 of the past 21 years in said month. The average gain is deceivingly small, however, due to the clearly outsized 2000+ pip decline seen in 1992. Said occurrence was the infamous George Soros trade that “broke” the Bank of England and skews our seasonality study. With that being said, we believe that GBPUSD risks remain fairly balanced on the month. The risk-sensitive currency could lose if the S&P 500 turns lower in the weeks ahead.
The “September Effect” on the S&P 500 and broader risky assets has typically led stocks lower on the month, and a continuation in said tendency would likely push the safe-haven US Dollar and Japanese Yen higher through the foreseeable future. Indeed, the month of September is historically the worst month of the year for the S&P. It is interesting to note that the US Dollar Index has likewise historically fallen in September, but a shift in market dynamics suggests that this is less likely in the month ahead.
USDJPY
The Japanese Yen has likewise shown an impressive tendency to gain against the US Dollar through the month of September. In fact, the US Dollar/Japanese Yen currency pair has fallen in September through 12 of the past 21 years—an average of almost 200 pips. Yet it serves to note that said tendency is heavily weighted towards the late 1980’s and early 1990’s when the USDJPY was in a fairly substantial downtrend. That being said, any downward pressure in the S&P 500 and major global stock markets would likely benefit the Japanese Yen. Viewed from that standpoint, seasonality suggests USDJPY losses are likely.
GBPUSD
The British Pound has shown a seasonal tendency to rise in the month of September, having rallied in 16 of the past 21 years in said month. The average gain is deceivingly small, however, due to the clearly outsized 2000+ pip decline seen in 1992. Said occurrence was the infamous George Soros trade that “broke” the Bank of England and skews our seasonality study. With that being said, we believe that GBPUSD risks remain fairly balanced on the month. The risk-sensitive currency could lose if the S&P 500 turns lower in the weeks ahead.
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