The Pfizer vaccine roll-out began in the UK overnight, triggering a rally in global equities, as economic sentiment soars trouncing the negatives from the surging spread of the virus. At the same time EU and German ZEW economic sentiment rose again, while EU GDP bounced back 12.5% in the third quarter. The good news may be constrained by the impact of political lock-downs, in reaction to the surging virus, which will be manifest in Q4 results. In the meantime the vaccine rally continues to translate into a ‘Santa Rally’.
The EUR traded 1.2110, while the GBP regained 1.3340, despite pressure from the lack of progress over the post-Brexit UK/EU trade deal. Negotiations continue to blow past one deadline, after another, with goal-posts in a state of flux. A no deal Brexit will result in trade continuing under WTO rules, until an agreement can be reached, but expect volatility in the currencies until an outcome is reached.
Japanese GDP bounced back in Q3, as expected, while Sino-Australian relations spiral downwards. The Chinese have decided to punish Australia by banning and limiting various Australian exports and launching a propaganda war of words. This is a message to trade dependent nations, to control criticism of the CCP regime in China and one which could have devastating consequences, if imposed for an extended period of time. The AUD drifted back to 0.7400, while the NZD held around 0.7040. These trade exposed commodity currencies remain extremely vulnerable to any break down in relations, with their number one trading partner, China.