The USD is being bought at the moment on rising US rates on expectations that the Fed is going to be hiking interest rates. The sharp rise higher in yields across the world on inflation fears is also boosting the USD. Why? Because if we are heading into a stagflationary environment where growth is slow, but inflation is high then the USD will gain strongly in those conditions. So, could this be a great time to buy the USD? The seasonals say ‘yes’.
Over the last 10 years, the US dollar index has risen 90% of the time between October 17 and November 17 with an average return of +1.61%. The largest gain was in 2015 with a 4.95% rise. The largest loss was in 2020 where it registered a -1.37% loss.
Major Trade Risks: Any slow down in inflation could see a reflationary environment where the rest of the world recovers quickly. That is a USD negative environment.
High Risk Investment Warning: Contracts for Difference (‘CFDs’) are complex financial products that are traded on margin. Trading CFDs carries a high degree of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent expert advice if necessary and speculate only with funds that you can afford to lose. Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. We do not recommend clients posting their entire account balance to meet margin requirements. Clients can minimise their level of exposure by requesting a change in leverage limit. For more information please refer to HYCM’s Risk Disclosure.