Monday November 16th, 2020

Vaccine news and robust Asian data see’s risk-on sentiment return to markets. Moderna reported its vaccine effectiveness is 94.5% from its phase 3 trials, joining Pfizer and BioNTech, and Britain’s AstraZeneca is also conducting a phase 3 trial. China’s industrial output exceeds expectations, while retail sales remains firm but misses expectations. Japan shares close at 29-year highs on positive GDP data which showed Japan’s its first expansion in four quarters. Asia-Pacific countries sign the Regional Comprehensive Economic Partnership (RCEP) forming the largest free-trade pact in the world. While in the US legal actions to the election results are unsuccessful, and an increasing number of republicans are calling on the US President to facilitate a smooth transition. In Asia, CNY up 0.3%, JPY is down 0.3% and Asian currencies are flat on average vs US$. Trading currencies remain volatile with AUD & NZD up 0.5%, ZAR & NOK up 0.9%, while MXN is up 1.2% vs US$. 

Oil prices strengthen +3% on vaccine news and on new data showing a positive economic rebounds for both China & Japan, as China’s refineries processing the most crude oil ever in October. Focus will be on Tuesday’s OPEC holds a committee meeting where output recommendations will likely be discussed. C$ strengthened in early trading supported by stronger oil and equity markets. Positive vaccine news will increase risk-on sentiment supporting C$. Support 1.3025 and resistance at 1.3170.

Euro extends its gains towards 1.1850 vs US$ on the Moderna announcement its vaccine is 94.5% effective. Supporting the risk-on scenario is the positive growth data results out of China and Japan. The EU remains in the midst of rising coronavirus cases which will continue to handicap its economic growth until at least the end of Q1/21. Markets will be focused on the ECB with Lagarde and Mersch both speaking today. Support holding at 1.1780 with resistance rebuilding at 1.1880.

GBP weakens below 1.32 amid Brexit uncertainty after the UK PM’s comments that the UK can prospect without a Brexit deal. Brexit talks continue in Brussels with hopes of some progress before Thursday EU leader’s videoconference. Optimism remains that a Brexit deal is possible after the US President Elect signaled, he will not sign a UK trade deal if the UK violates the Good Friday Agreement in Ireland. The UK PM is in Isolation at Downing Street after being close to a MP who tested positive for covid. Brexit remain the key GBP driver. Support 1.3150 with resistance holding at 1.3280, if breached look for possible extension to 1.3482 (Sep1st).