Buying the GBP/USD in the month of April has historically been a wise move. Strong seasonal factors are in play which have meant that the GBP appreciates during this month. In fact, over the last thirteen years, the GBP/USD has appreciated every time in the month of April.
According to FX strategist Karmal Sharma from Bloomberg Global Research London it is due to, "a combination of the end/start of the UK tax year" and that there is also a strong "month of dividend payments by the UK corporates are factors which we think are at play driving GBP strength during April".
In addition to April pound strength Adam posted at the start of the month the seasonal weakness in the USD with the Dollar Index falling in April an average 1.26% over the past decade. See Adam's post for more details on that...
Long GBP, short USD; an ideal seasonal trade.
So far in April those strong seasonal factors have been playing out. As this is my first day today I am having a few computer gremlins which is preventing me from easily attaching images to the post, Grrr! However, if you flick up a GBP/USD chart you will see that the pair opened the month at 1.41015. It reached a high of 1.4375, but has since retraced to 1.41825 at present with soft CPI data out of the UK yesterday with a reading of 2.5% y/y.(2.7% exp).
This may mean that the recent attempt, and failure, of breaking out of the 1.4300 overhead resistance level will cap any further appreciation of the pound. With Retail Sales out shortly (bearing in mind the inclement UK weather recently) taking profits now on any long GBP/USD positions open from the start of the month may prove to be a prudent move, banking a decent profit for anyone long.
