Dollar Seasonality Turns Hostile as Two More Fed Meetings Loom

The US dollar's seasonal performance has been analyzed by StoneX Media, and the results are mixed. According to their data, which dates back to 2000, September is actually one of the strongest months for the dollar, with a win rate of 56 percent and average returns close to flat.

However, as we move into October and December, the record turns hostile. December carries the lowest win rate and the most negative average and median returns for the US dollar.

This seasonal low point coincides with two more Federal Reserve meetings and updated policy forecasts, which could lead to a gap between market pricing and guidance. The current hawkish case is supported by elevated inflation expectations and crude oil prices, but a genuine pullback in oil would remove this support at a time when the calendar is already leaning against the dollar rally.

As Market Analyst Matt Simpson notes, 'this might not be the first time we've seen market pricing overestimate the Federal Reserve's ability to hike'. The repricing of Fed Funds futures from 32 basis points of expected tightening to about 101 basis points by July highlights this trend.