News & Analysis


The Canadian dollar rallied in yesterday’s session on news that Pfizer’s latest trial of its vaccine proved to be more effective than initially expected, likely because of the substantial jump in crude prices. News that a vaccine in the US that could start to become available as soon as this month has helped lift the global growth outlook, and, therefore, the demand outlook for oil. This came just weeks after both outlooks sustained a substantial blow on the news of a second wave in Canada and Europe. However, the loonie failed to hold its gains above a key psychological level and has continued to float marginally lower today. Speaking to reporters yesterday, Prime Minister Justin Trudeau said that the Pfizer trial results were an “encouraging” development and that if all goes well the vaccine should be available to Canadians sometime over the next three months with millions of doses already secured for the Canadian public. Vaccine progress will be key for markets in the coming months with supply constraints meaning the distribution and availability of a vaccine won’t be equal across economies, leading to growth discrepancies.


The dollar has had a chaotic 24 hours, at first tentatively weakening yesterday morning as an extension of last week’s price action. However, the news that Pfizer’s Covid-19 vaccine trial had gone better than expected gave risk appetite a boost and caused a sharp rally in the greenback that was particularly acute against the euro and yen. Since then, this move has unwound somewhat as the good vaccine news has been tempered by questions over how effective it will ultimately prove. Although vote tallies indicate that Joe Biden has won the US Presidential election, the current administration of Donald Trump continues to contest the apparent result. Attorney-general William Barr has authorised prosecutors to investigate possible electoral fraud, despite a lack of evidence. Several lawsuits have been filed across the country, many of which have already failed in the courts. The US data calendar begins to pick up today, with the National Federation of Independent Business releasing its small business Index at 11:00 GMT, followed at 16:00 by the job openings and labour turnover summary. FOMC speakers will dot the evening, beginning with Kaplan at 18:00, followed by Quarles at 20:00 and Brainard at 11:00.


The euro keeps trading with a mixed tone this morning after being drawn into the big dollar swing in yesterday’s trading session following positive news from Pfizer’s vaccination trial. Additionally, yesterday’s EU trade minister meeting gave the green light to trigger $4 billion worth of tariffs on the US as of today. The tariffs will target various Boeing models after duties over unfair subsidies to Boeing Co. and are meant to give the EU more leverage in pushing for a truce that has been evasive with President Donald Trump, who remains in office until January 20th. EU Trade Commissioner Valdis Dombrovskis stated the EU wanted to see both sides remove their tariffs, especially with the pandemic “wreaking havoc on our economies”. Datawise, markets will focus on the outcome of the ZEW survey data releases from Germany and the eurozone at 10:00 GMT. With fresh lockdowns implemented across the entire bloc, the current situation index for Germany is set to decrease from -59.5 to -63.3 according to the median of forecasts submitted to Bloomberg, while consensus sees expectations for the coming 6 months fall to 44.3 down from 56.1. Later in the afternoon, a speech by the European Central Bank’s Klaas Knot at the UBS European Virtual Conference may provide markets with insights on the central bank’s latest views on the eurozone economic developments.


Sterling’s price action yesterday was mixed, with the pound swinging around within a 0.7% range. While the vaccine news provided a lift for global risk appetite and an initial boost to currencies like EUR and GBP, the dollar started to bounce back in the afternoon of yesterday’s session after options rolled off on EURUSD and profit taking began. Today, the pound’s rally is seemingly on a stronger footing with GBPUSD up nearly half a percentage point in today’s trading. This comes after the House of Lords voted to remove clauses from the Internal Markets Bill that would give the UK the power to unilaterally rewrite parts of the Withdrawal Agreement and in turn break international law, shifting the emphasis back onto the Prime Minister as his armoury is weakened with negotiations reaching their end-game. Sterling’s rally was likely boosted by today’s data also, with the claimant count unemployment rate falling from 7.4% to 7.3% in October as unemployment claims contracted by 29,800. However, distortions in the claimant count data due to the lack of face-to-face interviews means the figures should be taken with a pinch of salt, especially as real-time PAYE data showed the number of employees on companies payrolls declined by 0.1% in October.



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