Across the major currencies, the Canadian Dollar (CAD) appears to have one of the strongest seasonal reactions around this time of the year, economists at Scotiabank say.
DXY patterns over the past 30-plus years suggest the USD typically strengthens in Q1 but loses ground through Q2 and Q3 before recovering, briefly and somewhat choppily, in Q4. That evolution is roughly reflected in the average rise and fall of US (10Y) bond yields over the course of the calendar year coincidentally.
April is the CAD’s best month of the calendar year against the USD and its firmer tone typically extends through May and June. The CAD averages a return of just over 1% in the April month against the USD and has strengthened 68% of the time since the 1990s.
CAD-supportive trends are reflected across asset classes. April is one of the strongest months of the year for the S&P 500, with an average return of just under 2%. April also typically heralds the start of a three-month jump in crude oil prices (with combined monthly gains through April-June over 10%).
Gains in stocks and commodities would provide the CAD with some support in the next few weeks and may help slow losses against a generally strong USD. But a significant improvement in the CAD undertone would likely require a USD-negative catalyst that is a bit harder to envisage right now.
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