October 28, 2021

COVID-19 vaccine roll-out raises investors’ hopes

LQDFXperts Weekly Highlights: COVID-19 vaccine roll-out raises investors’ hopes

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As the United States begins its first shipments, the COVID-19 vaccine roll-out raises hopes for a swift recovery from the global coronavirus-induced economic downturn.

Shipments of the Pfizer-BioNTech vaccine fanned out to distribution points across the United States on Sunday. Injections set to begin later on Monday.

That was despite the second waves of the pandemic forcing Germany, the Netherlands and possibly London back into stricter lockdowns.

Hopes for a fiscal stimulus deal in Washington were also boosting market sentiment. Talks on a federal COVID-19 relief package have not yet been fruitful.

The U.S. Congress will try this week to end months of indecision and infighting over the coronavirus aid. A $908 billion bipartisan COVID-19 relief plan will be split into two packages in a bid to win approval.

Britain is likely to leave the European Union in three weeks without a trade deal in place. Markets increasingly priced the respective risk. Current arrangements will end on Dec. 31 when Britain’s Brexit transition period concludes. Britain and the European Union agreed to continue talks on post-Brexit trade beyond Sunday’s deadline.

The European Central Bank announced a new round of stimulus in line with market expectations. EU leaders also reached a compromise over a pandemic aid package.

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Vaccine optimism still a key driver –Central Banks meetings eyed

Data on Friday showed that U.S. producer prices barely rose in November. Other data showed a surprise improvement in consumer sentiment early in December.

For the week ahead, market participants will focus on a series of central bank meetings. The U.S. Federal Reserve is on Wednesday and the Bank of England is on Thursday.

Progress on COVID-19 vaccine cheered risk sentiment, with the first doses being shipped across the United States.

  • On Tuesday (15.12), investors are waiting for the Federal Reserve’s policy meeting. The market is assuming the central bank will merely refine its forward guidance on policy. Tuesday also sees China’s monthly data dump.
  •  Wednesday (16.12) sees the global flash PMIs. The estimate for the UK Inflation Report for November is 0.6%. Eurozone Inflation Report will probably post a gain of 0.2% for a third successive month.
  • The Bank of England on Thursday (17.12) and the Bank of Japan on Friday (18.12) will close out the central banks’ meetings for 2020 this week. BoE policymakers may probably keep the Official Bank Rate at 0.10%.

Follow this week’s economic calendar.

LQDFXperts – COVID-19 vaccine roll-out raises investors’ hopes

New coronavirus restrictions on activity in Europe – including a strict lockdown in Germany – had limited market impact.

Near-zero U.S interest rates and the prospect of a vaccine-driven global economic recovery lessens the need for safe-havens.

EUR/USD posted another strong week, as the pair punched across the 1.21 line.  The euro continues to gain ground against the US dollar. With the approval of vaccines roll-out, the greenback could find itself under further pressure this week. Analysts are overwhelmingly calling for further U.S. dollar weakness as global growth picks up and with the U.S. Federal Reserve expected to hold rates near zero for years to come.

GBP/USD suffered its worst week in three months, dropping 1.5%. Analysts are cautious on the outlook for the pound. The currency’s 18% rally earlier this month has meant the room for disappointment is low if a trade deal falls short of market expectations. If the impasse continues, GBP/USD could fall below the 1.30 level.

The Canadian dollar pushed its US counterpart close to the 1.27 line. But the loonie was unable to consolidate these gains, as USD/CAD was almost unchanged on the week. With FDA approval of Pfizer’s Covid vaccines, risk sentiment has risen, which is bullish for the Canadian dollar. As well, a possible agreement on US fiscal stimulus would likely weigh on the US dollar.

PLEASE NOTE The information above is not investment advice.

Sources: Reuters, CNBC, BBC, The Guardian