The pound’s good fortune is set to continue this month, if seasonality is any guide.Sterling appreciated versus the dollar every April during the last 13 years in what Bank of America Merrill Lynch describes as the strongest seasonal trend among Group-of-10 currencies. In a research note, the bank recommended a two-month option trade to take advantage of the periodic strengthening pattern, while Mizuho Bank Ltd. and Rabobank also have put stock in the U.K. currency’s tendency to outperform in April.Strong SeasonalityThe pound has gained versus the dollar every April for more than a decadeThe trend corresponds to a typical increase in incoming capital at this time of the year, driven by dividend payments to British shareholders from foreign companies and other investment inflows that mark the start of the U.K. financial year. The fact that sterling has strengthened in April even during past episodes of heightened financial instability and political risks helps boost conviction in the seasonality, according to Bank of America.
Source: Why April Showers the Pound With Good Fortune – Bloomberg
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Craig Erlam
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