Alongside rising equities, this week saw further outflows in the US dollar. There are good reasons for USD weakness heading into year-end. USD weakness in December, which expresses itself through the Dollar Index, is mainly due to US taxation issues. It is a pattern that has repeated itself over the last 50 years. The largest fall in the Dollar Index was -6.43% in December. Statistically, the Dollar Index has lost value 32 times in December over the last 49 years. Will that pattern repeat itself again this year? At the time of writing the OPEC+ decision is undecided, but that will govern near-term oil prices.

Other key events from the past week

• Equities surge: Record inflows, November 30. World equity markets saw record inflows in November on vaccine optimism. Most major analysts expect buyers on dips in the major indices heading into 2021 on global recovery hopes.
• GBP: Brexit drama continues, December 01. On Tuesday, news that the EU and UK were entering ‘the tunnel’ saw the GBP strengthen. However, on Wednesday, the EU’s chief’s Brexit negotiator said major differences remain. Expect more GBP volatility next week.
• AUD: Interest rate decision, December 01. Rates were kept unchanged at 0.10% as expected and the RBA stated it was not expecting to raise the cash rate for the next 3 years. However, Governor Lowe said Australia had ‘turned a corner’ on the economy.

Key events for the coming week

• CAD: Interest rate decision, December 09. The Bank of Canada is expected to keep the rate unchanged at 0.25% next week. However, with a global recovery anticipated, will the BoC surprise markets with an upbeat outlook?
• EUR: Interest rate decision, December 10. The ECB is expected to expand its PEPP program by €500 bln and extend it by 12 months. 80% of those surveyed by Reuters expect alterations to the TLTRO’s terms. Will the ECB cut rates too?
• S&P500: Santa rally coming? December 04. Over the last 70 years, the S&P500 has gained between December 15 and January 01. It has risen in 54 years out of those 70 years. The largest gain was a whopping +8.53%. Will vaccine optimism this year help investors repeat the pattern?