Optimism about COVID-19 promising vaccine updates has not faded away yet amid growing expectations of more government stimulus soon for coronavirus-hit economies.
Enthusiasm about progress on the development of COVID-19 vaccines remain key drivers in markets. Britain is preparing to roll out the Pfizer/BioNTech vaccine this week.
The major economies are showing better numbers in the third quarter, but Covid-19 is still hampering economic growth. Promising vaccine updates from major drugmakers have raised investor hopes for an economic recovery next year.
Talks aimed at delivering fresh coronavirus relief gathered momentum in the U.S. Congress on Friday. Further, the Federal Reserve will probably make more adjustments to its quantitative easing later this month.
Weak U.S. jobs data heightened expectations of economic aid. Non-farm payrolls increased by 245,000 last month, the smallest gain since May. This was a sign the jobs recovery was slowing.
Post-Brexit trade talks hung in the balance. British and EU negotiators have at best 48 hours left to avoid a disorderly parting of ways at the end of this month. Last-ditch talks between Britain and the European Union resumed in Brussels to strike a trade deal. Investors re-evaluated the risk of a no-deal Brexit. Fears grew rose of a chaotic no-trade deal Brexit on Dec. 31 when the United Kingdom finally leaves the EU. The EU’s chief Brexit negotiator, Michel Barnier, is “rather downbeat” about the chance of a deal. EU diplomats said the ball was now in Johnson’s court. Traders and analysts still believe that a Brexit deal is more likely than not.
Fresh Sino-U.S. tensions over Hong Kong dented sentiment and sapped some appetite for risky assets. Washington was preparing to impose sanctions on some Chinese officials over their alleged role in Beijing’s disqualification of elected opposition legislators in Hong Kong.
START TRADINGVaccine optimism still a key driver – GDP and Central Banks announcements eyed
Analysts are now looking to the EU leaders summit on Dec. 10-11 as a possible deadline for a final Brexit deal. Investors also await concrete signs of progress on a coronavirus relief bill.
This week, we’ll get a look at GDP reports in Japan and the UK, as well as central bank announcements from the ECB and Bank of England.
- On Monday (07.12), investors are awaiting Japan GDP. The economy is expected to bounce back in Q3, with an estimate of 5%.
- On Wednesday (09.12) investors will focus on the BoC Rate Decision. A positive tone from the rate statement could bolster the Canadian dollar.
- On Thursday (10.12) investors will eye ECB Rate Decision, the UK GDP and the US CPI. The ECB holds its policy meeting later this week. The European central bank will probably add further easing. Analysts expect an increase in the Pandemic Emergency Purchase Program by 400-600 billion euros.
Follow this week’s economic calendar.
LQDFXperts – Optimism about COVID-19 vaccines keep investors upbeat
Upbeat announcements on COVID-19 vaccines have helped drive a rally in riskier currencies at the expense of the safe-haven dollar. The euro had their best week in a month against the dollar.
EUR/USD enjoyed a strong week. Over the past week, the U.S. dollar sell-off has extended further. Greenback’s weakness was most evident against the Swiss franc, euro, and Canadian dollar. On the week, the dollar index was down 1.3%, its largest weekly loss since early November. The euro has been one of the biggest winners from recent dollar weakness, breaking decisively above $1.20 this week.
GBP/USD rose close to 1% and broke above the 1.35 level. The pound had a great week, but this was more a result of weakness in the US dollar rather than strength in the pound. Sterling is see-sawing on comments on the likelihood of a deal before a transition period ends on Dec. 31.
USD/JPY showed little movement for a second straight week, as the pair closed the week slightly above the 104 level. The dollar has been in retreat mode against many of the major currencies but hasn’t lost much against the yen.
AUD/USD rose for a fourth successive week and pushed above the 0.74 level. The US dollar shows no sign of a rebound, although profit-taking remains a possibility. Investor sentiment to cyclical currencies like the Aussie remains positive.
The Canadian dollar enjoyed its strongest week since May, as USD/CAD dropped 1.5%. Canadian GDP slowed to 0.8% in September, as the economic recovery may have run out of steam. The US dollar remains on the defensive. A weak NFP report on Friday could weigh on investor sentiment towards the currency.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, CNBC, BBC, The Guardian