Just a week after Pfizer announced high efficacy of its COVID-19 vaccine, Moderna followed suit. Another round of positive news sent equities and industrial commodities higher. The US dollar declined mildly, yet the euro and the pound failed to profit from its weakness.
Although US blue chips set new all-time highs and Brent oil enjoyed a ride higher, the overall market reaction was stifled compared to last week’s bounce. The EUR/USD pair continues to trade above 1.18 mark. Market participants cling to buy the dips strategy, but the advance remains anaemic.
The sterling underperforms, commodity currencies rally
As far as the sterling is concerned, the GBP/USD pair was depreciated by Prime Minister Johnson, who returned to his argy-bargy tactics and stated he is confident that the United Kingdom will prosper without a trade deal. The Brexit talks drag on, however, and despite the two sides struggling to solve key issues, a deal remains a central scenario and risks for the pound are therefore clearly tilted to the upside.
Commodity currencies were lifted as crude oil benchmarks skyrocketed and copper prices jumped to two-year-highs, but they may struggle to sustain recent, stretched levels. The Canadian dollar, the Norwegian krone and the Russian ruble will be vulnerable if the upswing in oil prices turns out to be short-lived. Today, the OPEC+ is expected to receive a recommendation from the Joint Ministerial Monitoring Committee to shelve previous plans to expand the production by nearly 2 million barrels per day starting from January. Regardless, the demand for fuels is set to remain lacklustre, stocks are very high, and production numbers are on the rise due to Libya and Iran returning to the global markets.
A boost from positive developments on the vaccine front
Yesterday Moderna announced that the efficacy of its COVID-19 vaccines is close to 95%. More importantly, the company claims it does not require ultra-low temperature storage which would solve some logistical hurdles. AstraZeneca/University of Oxford stands next in line to present its interim results. The more alternatives are available, the faster the mass vaccination process begins. Markets choose to see the light at the end of a tunnel and be satisfied with the recent COVID-19 situation. Before the global GDP growth reaccelerates thanks to the vaccine, numerous economies will be hit hard by the pandemic which will probably cause market jitters and sharply lift volatility from recent, extremely low levels.
Conotoxia research team