Why FX Traders Shrugged Off Pfizer’s Update
Daily FX Market Roundup November 18, 2020
The big story in the news today was Pfizer’s vaccine update – their results now show their vaccine being 95% instead of 90% effective in preventing coronavirus. This exceeds the 94.5% effectiveness reported by Moderna earlier this week. Unfortunately currency and equity traders were not impressed.
The problem is that while investors believe pharmaceutical companies are near the finish line, they understand that widespread dissemination can’t happen until spring of 2021 at the earliest. Moderna, whose vaccine has a longer shelf life and can be stored at -20 degrees Celsius (temperatures closer to a regular freezer) versus Pfizer’s -70 degree Celsius (colder than Antarctica), detailed the challengers of mass producing the vaccine. With additional manufacturing lines, they can only produce about 500 million doses. Also as we have been talking about for the past few weeks, with widespread distribution of the vaccine months away, the pandemic will worsen in the US and abroad – Japan set its virus alert level to its highest after reporting record cases on Wednesday.
The US dollar extended lower against all of the major currencies with the New Zealand and Canadian dollars leading the rise. Weaker building permits and housing starts didn’t help. Tomorrow’s Philadelphia Fed manufacturing index should be softer as well given the sharp decline in the Empire state survey. Stronger inflation data from New Zealand and Canada helped to lift those currencies. In New Zealand producer prices rose more than expected and in Canada, consumer prices rose 0.4% against a forecast of 0.2%. This uptick was no surprise considering that IVEY PMI reported higher prices. The rise in oil prices also helped to drive the loonie higher. With that said, the Australian dollar gained strength despite slower wage growth and decline in new home sales.
Sterling extended its gains on the back of stronger inflation data as well which is consistent with the rise in shop prices and the Bank of England’s decision to leave their inflation forecasts unchanged. Euro on the other hand lagged behind as the prospect of ECB easing and Q4 contraction hangs over the currency.