December Forex Seasonality Overview:
- December typically brings cheer for the Australian and New Zealand Dollars, while the US Dollar is left with coal.
- DXY Index weakness, seasonally, can be attributed to its largest component, the Euro (57.6% of weighting), and the Canadian Dollar (9.1% of weighting).
- December hasn’t brought the Santa Claus Rally for US stocks in recent years, but gold prices have tended to do quite well in the last month of trading.
Seasonal Trends Not in US Dollar’s Favor
The beginning of the month warrants a review of the seasonal patterns that have influenced forex markets over the past several years. For December, 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.
Monthly Forex Seasonality Summary – December 2020 (Chart 1)
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Forex Seasonality in Euro (via EUR/USD) (Chart 2)
December is a very bullish month for EUR/USD, 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 +1.21%. Over the past 10-years, it has been the third best month of the year, averaging a gain of +0.54%.
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Forex Seasonality in British Pound (via GBP/USD) (Chart 3)
December is a neutral month for GBP/USD, from a seasonality perspective. Over the past 5-years, it has been the fifth best month of the year for the pair, averaging a loss of -0.19%. Over the past 10-years, it has been the fifth best month of the year, averaging a gain of +0.06%.
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Forex Seasonality in Japanese Yen (via USD/JPY) (Chart 4)
December is a neutral month for USD/JPY, from a seasonality perspective. Over the past 5-years, it has been the eighth best month of the year for the pair, averaging a loss of -0.85%. Over the past 10-years, it has been the sixth best month of the year, averaging a gain of +0.07%.
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Forex Seasonality in Australian Dollar (via AUD/USD) (Chart 5)
December is a moderately bullish month for AUD/USD, from a seasonality perspective. Over the past 5-years, it has been the fourth best month of the year for the pair, averaging a gain of +0.39%. Over the past 10-years, it has been the seventh best month of the year, averaging a gain of +0.16%.
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Forex Seasonality in New Zealand Dollar (via NZD/USD) (Chart 6)
December is a very bullish month for NZD/USD, 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 +1.65%. Over the past 10-years, it has been the best month of the year, averaging a gain of +1.45%.
Forex Seasonality in Canadian Dollar (via USD/CAD) (Chart 7)
December is a moderately bullish month for USD/CAD, from a seasonality perspective. Over the past 5-years, it has been the eighth best month of the year for the pair, averaging a gain of +0.29%. Over the past 10-years, it has been the seventh best month of the year, averaging a gain of +0.07%.
Forex Seasonality in Swiss Franc (via USD/CHF) (Chart 8)
December is a very bearish month for USD/CHF, 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 -1.67%. Over the past 10-years, it has been the second worst month of the year, averaging a loss of -1.22%.
Seasonality in US S&P 500 (Chart 9)
December is a neutral month for the US S&P 500, from a seasonality perspective. Over the past 5-years, it has been the worst month of the year for the index, averaging a loss of -1.05%. Over the past 10-years, it has been the ninth best month of the year, averaging a gain of +0.48%.
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Seasonality in Gold (via XAU/USD) (Chart 10)
December is a very bullish month for gold (XAU/USD), from a seasonality perspective. Over the past 5-years, it has been the fourth best month of the year for the precious metal, averaging a gain of +1.67%. Over the past 10-years, it has been the fifth worst month of the year, averaging a loss of -0.45%.
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— Written by Christopher Vecchio, CFA, Senior Currency Strategist
