April is the Best Month for Pound-to-Dollar Bulls

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Seasonal trends favour a stronger Pound against the Dollar.

However, this year's month of April comes with the obvious risk in the form of Donald Trump's tariff announcement.

Although the announcement has top billing for financial markets, some analysts are making compelling arguments that there is a decent chance that markets stabilise in the days that will follow the April 02 announcement.

In short, a lot of bad news regarding tariffs has been priced in, Trump won't want to rock the boat too much, and the eventual outcome is palatable.

Under such a scenario, seasonality trends come into play.

"April has historically been the strongest month for GBP/USD," says Mathew Weller, analyst at Forex.com.

The Pound-to-Dollar exchange rate (GBP/USD) has typically seen its best performance in April, with average returns of around +0.66% since 1971.

"Like the euro, the British pound also gained significant ground against the greenback in March. As long as cable holds above the 200-day MA (currently around 1.2800), the path of least resistance should remain to the topside as we begin Q2," says Weller.

Analysts at Bank of America point out that whilst seasonality remains a theme, its impact has faded since 2017.

"We think the underlying motivations behind seasonality - FTSE listed companies repatriating overseas earnings to pay UK dividends - but external factors since 2017 have impacted the signal. We think structural changes since 2016 account for this," says Kamal Sharma, FX Strategist at Bank of America.

However, Bank of America sees "some normality returning to GBP trading in recent years," and that GBP can benefit from seasonal tailwinds.

"Indeed, according to Bloomberg, April is the second heaviest month where companies go ex dividend (company dividend allocations have been announced)," notes Sharma.

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