13/11 – Vaccine’s not here, virus very much is

13/11 – Vaccine’s not here, virus very much is

GBP: Looking vulnerable once again

EUR: Port in a storm

USD: Should remain strong as infections continue to rise


There are only 50 days left this year and on at least one of them a Brexit deal must be agreed between the UK and Europe. The mood music from Brussels, that was so optimistic last week, has darkened in recent sessions with reports suggesting a no-deal exit may be good to “clear the air” before another attempt at a deal in the new year.

With Brexit chatter not as optimistic as previously thought and virus cases rising globally yesterday was a bad day for equity markets and sterling’s correlation to wider risk pulled the pound lower. If wider market sentiment continues to price for a virus-free existence next year then it remains very vulnerable to delays around vaccination.

UK news will likely be filled with comment around the apparent departure of Boris Johnson’s right-hand man Dominic Cummings by Christmas, although this has had no discernible market impact.


The euro managed to hold up well in the face of falling risk appetite yesterday gaining against sterling as the latter melted like a candle. With the uncertainty as to which way the USD will now move – higher on local outperformance, or weaker as the world takes over – the EUR looks poised to remain solid for longer. It’s unexceptional but in these markets, that’s not a bad thing.

US dollar

Stronger jobless claims but weak inflation numbers showed a US economy that is over the worst of the Covid-19 slowdown but is not at a position wherein inflation is being created despite the level of monetary stimulus that the Fed has poured into markets. This is not a surprise given dynamics in consumer confidence and wage levels currently in the US; they are not spilling higher anytime soon.

US PPI, inflation at the factory gate, is due this afternoon so any nascent cost push inflation at the margin.

Dollar risk from Trump lawsuits over the election has so far failed to materialise. Overnight reports suggest that Republican lawmakers, donors and right-leaning media networks are all united in telling Trump to accept the loss and start the transition process with the Biden administration. We expect that the lawsuits will continue until the Electoral College is finalised at the end of the month but, unless there is further trick up his sleeve, this risk has been put to bed.

Markets are likely to be focusing on Covid-19 figures today which should keep the wind at the USD’s back


Commodity currencies have continued to shed the gains that Monday’s virus news prompted across the globe as investors remember that the vaccine is not here yet and the virus very much is. The mood was summarised nicely by the Governor of the RBNZ who told journalists that the bank’s growth forecasts were based on “very bold assumptions” around the full reopening of the country’s borders by 2022.

In a world where markets are priced for perfection very quickly, risk to the downside will always be a moment away.

Have a great day and a better weekend

Thanks for subscribing to our market reports!

You've been added to our Chief Economist's mailing list for his morning reports.

Jeremy Thomson-Cook

Jeremy Thomson-Cook

Jeremy has over 13 years experience working in the FX industry. As a specialist in political risk mitigation and currency hedging, he regularly advises clients on the day-to-day moves of the markets and the implications of fiscal and monetary policy on international businesses.