MARKET RECAP 24th MAY – 28th MAY 2021


Hello there traders.

It’s month end thereabouts with Monday 31st being the last day of the May officially but with Bank Holidays in the UK and in the US so much less liquidity in the market. What’s been going on this week? Let’s have a look at the highlights!

We actually started off the week with Bank Holidays in parts of Europe and Canada which meant things started off the week a little quieter.

As you can see we had the Monetary Policy Report Meetings in the afternoon where BOE Bailey, Cunliffe, Saunders and Broadbent testified to Parliament on their annual reports. The annual reports can be quite large but here are some of the highlights

  • May be circumstances for rates to go negative
  • MPC does not currently think negative rates will be needed
  • transitory CPI developments should have few direct implications for inflation over the medium-term
  • current guidance on QE unwind is too prescriptive


  • the important evidence will be on the impact of unemployment one for low is removed
  • emphasizes the guidance that we will not tightening policy until we have clear evidence that progress is being made in eliminating spare capacity
  • scale of corporate insolvencies as we emerge from the pandemic an important indicator
  • my view is that risks are two-sided
  • considering the state of the economy, it is important to focus on the level of GDP not just the growth rate
  • broadly agrees with the guidance given by the Bank of England in May
  • cost pressures in global goods markets overstate the likely path of overall CPI inflation in the UK
  • UK CPI likely to continue to be restrained for some time by spare capacity in the labor market, with relatively weak underlying wage growth and subdued service sector inflation
  • main upside risk to Outlook for activity probably are from a greater rundown of household savings
  • downside risks from the rising corporate debt and the prospect of higher corporate borrowing costs
  • global Covid cases possibility could way on UK firms hiring and investment decisions.

In the early hours of Wednesday we had the RBNZ Monetary Policy Statement.

Highlights are:

  • Cash rate unchanged (as expected)
  • Funding for Lending program unchanged
  • Large scale asset purchase program unchanged
 RBNZ projections indicate the cash rate may rise in the second half of 2022
  • says to maintain stimulatory monetary settings until it confident that inflation and employment targets achieved
  • says near-term economic data will continue to be highly variable
  • aggregate level of employment has also proved resilient, while fiscal spending continues to support domestic economic activity.
  • tourism-related business activity continues to be affected by the absence of international visitors
  • medium term inflation employment to remain below remit targets in the absence of stimulus
  • effect of the government’s new housing policies on house price growth and hence economic activity will also take time to be observed
  • our medium-term outlook for growth remains similar to the scenario presented in the February
  • we remain cautious however, given ongoing virus-related restrictions in activity,
  • price pressures on businesses are likely to be temporary and are expected to abate over the course of the year.

Price for NZD/USD came into the major resistance zone of 0.7300 and has formed an Evening Star pattern signalling some downside is possible (see chart).

Finally let’s talk about Seasonal trading because this month has been a poor month for seasonal following strategies. Let’s recap


1) Cable Weakness
Cable had fallen in May in 11 straight years coming into this month but that streak is well and truly over. GBP was the best performer this month, gaining 2.56% MTD.
2) Kiwi Weakness
May is the second-weakest month on the calendar for the kiwi but this year that wasn’t the case as it had a modest gain. It’s been a choppy market with NZD/USD being range bound for the whole month of May.
3) Dollar Rebound
May is the best month for the DXY over the past 20 years but that didn’t hold up in 2021. The dollar index fell 1.2% MTD. The dollar bulls tried to jump on taper talk and the strong CPI data but were beaten back. The inability of the dollar to get any traction with some fundamental headline help and a seasonal tailwind is a bad sign.
This is why we say trade what you see and not what you think!!
Might be a nice weekend coming up so enjoy the break.
T & T


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