December 2020 Market Wrap

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US President Trump has finally agreed to sign the US$900B pandemic relief bill, after threatening to not sign it following a hard-won agreement from Congress. Together with the successful completion of the Brexit deal, as well as the vaccine rollouts, headline risk has been greatly minimized stepping into the new year.

The UK has successfully transitioned out of the European Union after almost five years of Brexit negotiations. Despite the conclusion, GBP declined, likely due to investors’ Brexit exhaustion after years of uncertainty. On the coronavirus front, strict lockdown measures in Italy, Spain, France, and Netherlands have slowed the virus curve and we are seeing positive signs of the curve flattening. That said, the new UK coronavirus strain has added a dampener to the market.

European Central Bank boosted asset purchases in mid Dec 2020, increasing their Pandemic Emergency Purchase Program by $500B and extending the program to 2022. Despite lowering growth forecast for 2021, they have raised it for 2022, signalling less pessimism and expressing intentions to keep monetary policy easy for the foreseeable future. EUR continue to climb to its strongest level in recent years, further propped up by the down trending USD.

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