Delays cause sell-off (Daily analysis 26.01.2021)

Risk assets and currencies trade heavily as bad news regarding vaccine and delays to the US fiscal package take over. The US dollar advances and the Norwegian krone experiences the strongest sell-off.

President Biden will pursue a broader agreement on the additional fiscal spending package. The new timeline may suggest approval in March. Consequently, the economy struggling with covid restrictions may not kick off as soon and as powerfully as previously it had been hoped. Risk appetite was also dented as AstraZeneca announced a huge delivery cut which added to woes given slower than expected vaccine rollout. The vaccination programmes are making much slower progress in a number of countries than had previously been planned by the European Commission. The goal to vaccinate 70% of adult EU citizens by the end of the summer seems impossible to achieve. Moreover, it is uncertain to what extent the vaccinations are effective against the virus's new variants.

The EUR/USD pair slips towards 1.21, and the GBP/USD exchange rate falls to trade close to the 1.36 area. The US dollar advance should remain capped for now as further gains seem unlikely due to the upcoming Federal Reserve meeting on Wednesday.

The Norwegian krone has suffered heavy losses since the EUR/NOK pair posted long-term lows last Thursday. The currency has been giving up some of the most recent gains due to its risk profile, and the back of new strict lockdowns in the Oslo area and crude oil benchmarks sell-off. Despite the recent weakness, we remain constructive on the currency, above all because the Norges Bank might deliver first rate hikes as soon as mid-2022.