Monthly Forex Seasonality – February 2022: USD Strong, AUD & NZD Weak, Stocks Mixed

February FX Seasonality Overview:

• February tends to be a risk-off kind of month, with the Japanese Yen and US Dollar faring better than growth-linked currencies like the Australian and New Zealand Dollars.
• US stocks tend to have a mixed performance, but the past 5-years have generally produced losses for the major indexes.
• Despite a bid in safe haven currencies, gold prices tend to decline in February.

The beginning of the month warrants a review of the seasonal patterns that have influenced forex markets over the past several years. For February, our focus is on the trailing 5-year and 10-year performances, both of which fully capture trading during the era of quantitative easing and expanding government deficits since the 2008/2009 Global Financial Crisis – not dissimilar from the environment we find ourselves in during the coronavirus pandemic recovery.

Now that we’re in a period of time where central banks are starting to end their QE programs and raise interest rates, alongside a significant reduction in fiscal stimulus efforts by governments, it may be the case that the 5-year averages are especially useful guideposts to help understand how FX, stocks, and precious metals will performing over the next month.

Monthly Forex Seasonality Summary – February 2022

Forex Seasonality in Euro (via EUR/USD)

February is a very bearish month for EUR/USD, from a seasonality perspective. Over the past 5-years, it has been the worst month of the year for the pair, averaging a loss of -1.12%. Over the past 10-years, it has been the fourth worst month of the year, averaging a loss of -0.57%.

Forex Seasonality in British Pound (via GBP/USD)

February is a very bearish month for GBP/USD, from a seasonality perspective. Over the past 5-years, it has been the second worst month of the year for the pair, averaging a loss of -0.94%. Over the past 10-years, it has been the second worst month of the year, averaging a loss of -0.60%.

Forex Seasonality in Japanese Yen (via USD/JPY)

February isa neutral month for USD/JPY, from a seasonality perspective. Over the past 5-years, it has been the sixth best month of the year for the pair, averaging a gain of +0.27%. Over the past 10-years, it has been the sixth worst month of the year, averaging a gain of +0.33%.

Forex Seasonality in Australian Dollar (via AUD/USD)

February is a very bearish month for AUD/USD, from a seasonality perspective. Over the past 5-years, it has been the second worst month of the year for the pair, averaging a loss of -1.40%. Over the past 10-years, it has been the fifth worst month of the year, averaging a loss of -0.46%.

Forex Seasonality in New Zealand Dollar (via NZD/USD)

February isa bearish month for NZD/USD, from a seasonality perspective. Over the past 5-years, it has been the third worst month of the year for the pair, averaging a loss of -1.62%. Over the past 10-years, it has been the fourth worst month of the year, averaging a gain of +0.06%.

Forex Seasonality in Canadian Dollar (via USD/CAD)

February is a very bullish month for USD/CAD, from a seasonality perspective. Over the past 5-years, it has been the best month of the year for the pair, averaging a gain of +1.52%. Over the past 10-years, it has been the fifth best month of the year, averaging a gain of +0.43%.

Forex Seasonality in Swiss Franc (via USD/CHF)

February is a very bullish month for USD/CHF, from a seasonality perspective. Over the past 5-years, it has been the second best month of the year for the pair, averaging a gain of +1.14%. Over the past 10-years, it has been the fourth best month of the year, averaging a gain of +0.53%.

Forex Seasonality in US S&P 500

February isa mixed month for the US S&P 500, from a seasonality perspective. Over the past 5-years, it has been the third worst month of the year for the index, averaging a loss of -0.60%. Over the past 10-years, it has been the sixth worst month of the year, averaging a gain of +1.15%.

Forex Seasonality in Gold (via XAU/USD)

February is a bearish month for gold (XAU/USD), from a seasonality perspective. Over the past 5-years, it has been the third worst month of the year for the precious metal, averaging a loss of -1.17%. Over the past 10-years, it has been the sixth worst of the year, averaging a loss of -0.14%.

--- Written by Christopher Vecchio, CFA, Senior Strategist