Three markets to watch next week (23.12.2021)

The final week will soon begin and markets are set to wrap up another pandemic-hit year. While coronavirus did not play as big a role on the markets in 2021 as it did in 2020, pandemic and response to it remained one of key drivers. Economic calendar for next week is rather empty but end-year changes in positioning may play a crucial role.

US500

End of the year period, just like end of the quarter periods, are marked with big positioning changes among investment funds. Managers often engage in the so-called "window dressing" - an action of buying well-known shares with the intent of highlighting them among funds' top10 holding list. Underperforming stocks also tend to be sold at the year's end as investors seek to optimize their taxes. This is a key thing stock investors should take into consideration while trading in the final week of the year.

USDJPY

USDJPY has been one of the best performing major currency pairs so far in 2021. Japanese yen dropped almost 10% against US dollar with USDJPY exchange rate jumping to the highest level since early-2017 in November. The pair climbed to the upper limit of the trading range at the end of the previous week near 114.30 handle. Christmas is not as celebrated in Asia as it is in Europe or the United States and Japanese markets will be open on each day of the current week, apart from New Year's Eve (Friday). This may help keep JPY on the move.

GOLD

Seasonal patterns for gold in December are inconclusive. 10-year seasonality patterns point to flat performance of gold in the final month of the year while 5-year patterns point to an average gain of 3%. Meanwhile, gold is trading around 1.5% higher month-to-date. 2022 is expected to be marked with even more policy tightening and it could have a negative impact on gold. In fact, ETFs have been net sellers of gold in 2021 and the outlook for a tighter monetary policy could support this trend further.