Insights

The dollar ended May on a weaker note than all major counterparts, with volatility in the FX market rebounding once more during the second half of the month. The greenback initially drew strength from trade deals the US secured with the UK and China. However, it swiftly resumed its downward trajectory following the credit rating downgrade of the US by Moody’s, mounting concerns over Trump’s tax bill, and the renewed threat of tariffs against China. 

The pound was the main gainer, as hotter-than-expected UK inflation led traders to pencil in only one additional quarter-point interest rate reduction by the BoE this year. The franc and the yen attracted safe-haven flows, though the latter lacked momentum due to the dovish stance by the BoJ. The euro also gained ground, albeit to a lesser extent, amid the ‘Sell America’ episode spurred by fiscal worries in the US. A significant proportion of foreign-owned US assets are held by Europeans, and thus, the ensuing selloff triggered a repatriation of euros. Gold also staged a rebound amid the rising uncertainty, closing the month around 6% lower from its all-time high.

May saw a continuation of the market conditions observed in April, with elevated volatility providing a supportive environment for the strategy to generate additional gains. While the first half of the month was characterised by more pronounced returns, the second half contributed meaningfully to overall performance through steadier, incremental gains and more consistent accumulation.