Trade rose sharply against all major currencies on Monday after Pfizer (NYSE 🙂 said its COVID-19 vaccine was 90% effective in preventing the virus. While Pfizer’s vaccine has yet to be submitted for FDA review and is complicated to implement (it requires two doses and must be kept at ultra-cold temperatures), it confirms that biotech companies are moving into the good direction. With more than 200 vaccines against the coronavirus in development around the world, a dozen human clinical trials, five out of six vaccines in phase 3 trials, a viable vaccine is upon us. After Pfizer’s announcement, Dr Fauci said Moderna (NASDAQ 🙂 is expected to have similar results. They use the same technology and are in the same testing phase. The medical community is also improving in the treatment of the disease so as to reduce the death rate. So, as cases of the virus skyrocket across the world, we’re just starting to see some positive vaccine news – more are likely to follow.
The index surged, closing over 800 points as Treasury yields hit their highest level since March. The US dollar has appreciated more than 2% against the and more than 1% against the. Its gains against other currencies were limited by risk appetite. Although President Trump did not concede defeat, most see Joe Biden as the president-elect and increased shares before Pfizer’s announcement. and were dragged down by the rising dollar, but it was a positive day for the, and the dollar.
European currencies are under pressure as investors rightly fear that nationwide lockdowns and record COVID-19 cases will take a heavy toll on the region’s economy. Even if a vaccine is developed, it will not be implemented until 2021. The fourth quarter will be terrible for the euro area and investors are preparing for this reality. Last week EUR / USD hit monthlong highs due to US election uncertainty, but we may have seen the currency top. EUR / USD is expected to trade closer to 1.16 than to 1.20 and today’s could be the nail in the coffin. We expect a sharp decline which reflects the difficult times ahead for the eurozone. The European Central Bank is expected to cut interest rates significantly next month to avoid a double-dip recession in the economy.
UK labor market figures are also due for release today and according to PMIs they have weakened considerably in the manufacturing and service sectors. Like the Eurozone, the UK is in the midst of a tight lockdown and the incoming data will remind us why the US government is reluctant to follow suit.
Meanwhile, the currencies of countries that beat a second wave of the virus soared alongside the US dollar. In Australia, the number of active cases of coronavirus has fallen below 90. In New Zealand, only 4 cases have been reported in isolation. By successfully controlling COVID-19 outbreaks for the second time, both countries will benefit from a stronger recovery that has led to stronger currencies. Meetings this week and we generally expect them to be less accommodating. Compared to other central banks, there is no rush to act. Although cases of the virus are on the rise in Canada, the Canadian dollar has hit a one-year high against the greenback following higher prices and signs of a steady recovery.