News that a vaccine developed by Pfizer Inc and partner BioNTech proved 90% effective in the first 94 subjects who were infected by the new coronavirus has helped buoy market risk appetite today, prompting big moves in USDJPY, higher-beta G10 currencies such as NOK and NZD, WTI and EM FX.
Markets were already trading this morning with an air of optimism as the news over the weekend meant a contested US election was practically dead in the water. Risk appetite then received another boost from the news of the Pfizer clinical trials, while the dollar experienced another wave of downward pressure. It is worth noting that the results are from a small clinical trial, but given the urgent need for a vaccine, Pfizer has requested permission to take the shot to market as early as the end of this month. This is positive for the global growth outlook which took a knock from the arrival of second waves just weeks ago.
With most participants not anticipating a widely available vaccination until the first half of 2021, today’s news arguably brought forward that timeline and resulted in re-pricing in markets.
The results of clinical trials will now be in scope for financial markets as many of the big Pharma companies enter the third phase of their trials at a time when global economies are struggling to balance re-opening and controlling the outbreaks. The ability for many developed market economies to re-open while protecting the vulnerable will be key for FX pricing, especially as the distribution of effective vaccines won’t be even nor will it be widely accessible in the early stages due to supply constraints. Today, however, the news has been positive and has resulted in a large move in market risk barometers.
The yen’s recent surge unravels as risk becomes more palatable for market participants
WTI climbs back above $40 per barrel as the demand outlook receives a Pfizer sized boost
Expanded majors spot moves today vs USD sees key risk barometers swing on the Pfizer news
53% of forecasters asked by Good Judgement predicted a distributed vaccination will be available in the US before the end of Q1 2021 – a 3% rise from last week
Note; the timing of these forecasts aren’t specified so may not incorporate fully the Pfizer news, tomorrow’s poll will be more telling
Author: Simon Harvey, FX Market Analyst