10/11 – Vaccine news becomes the new stimulus

Jeremy Thomson-Cook
Jeremy Thomson-Cook 10 November 2020

GBP: Record level of redundancies

EUR: Falls back after virus news

USD: How will the virus alter stimulus conversations?


Sterling was caught up in yesterday’s vaccine-driven rush into risky assets but has since calmed down as cooler heads maintain that we are a long way from life being back to normal. Here in the UK, the new normal of an extended furlough scheme turned this morning’s unemployment statistics into a signal of what has already been lost.

With the furlough scheme now extended until the end of March, the labour market has once again been put back to sleep by the Chancellor preventing a rude awakening as we head into winter.

Unfortunately, a record level of 341,000 redundancies in the past few months show that for many people the additional government support came too late to save their roles. The key test will now be how many of those workers are re-employed or find different work as this lockdown comes to an end. In the short term however, we would suspect businesses are likely to increase hours for current workers first before taking on the costs of additional staff.

These figures will do nothing to alleviate fears that the UK is headed for a double-dip recession should lockdowns continue.

Overnight, the government was heavily defeated on its Internal Market Bill that breaks international law and has upended the Brexit negotiating process. The government will likely ignore the Lords and Brexit headlines will have a much greater influence over sterling the closer we get to Sunday’s latest deadline.

For now, expect any subsequent vaccine news to keep GBP supported.


The single currency was up and down like a malfunctioning lift yesterday but has calmed overnight. EURUSD hit 1.1920 yesterday afternoon before giving up a cent as markets became wary of over-reaching on yesterday’s vaccine news.

German business confidence numbers at 10am are likely to show a fall given increased lockdown procedures locally but should have little impact on the EUR.

US dollar

A Biden bounce in equities quickly turned into a jab jump with all markets reacting to the Covid-19 vaccine news from Pfizer. Safe haven currencies like the yen and Swiss franc fell alongside the USD while commodity and emerging market currencies pushed higher.

The invention of a vaccine creates as many questions as it answers economically with all being crucial for the global recovery:

• Which countries will get it first?

• How many people will take it?

• Will it become a necessity to travel?

• How can it limit transmission in crowds?

• And from a policymaking point of view, is it enough so as to not need to add more stimulus?

All these questions will need to be answered in the coming weeks and months but the possibility of a vaccine by Jan 2021 does little for businesses and consumers who need support now. Stimulus conversations in the US have yet to get off the ground following the election and we think it remains an outside chance before Biden is sworn into the Presidency on January 20th.

In other words, don’t be so sure the USD will weaken further from here.


Oil prices were 10% higher at one point yesterday boosting commodity currencies globally. That exuberance has calmed through the Asian session however and we expect investors to take profit through the week should the vaccine news slip from the front pages.

Have a great day.