The Canadian dollar and other risk-friendly assets are getting a triple boost this morning. First, there is news of a 90% effective vaccine from Pfizer and BioNTech. Second, this is the first trading day after Joe Biden was declared the winner of the US presidential election by major media outlets. Third, it continues to look like Joe Biden’s administration will not have a free hand to pass all the legislation it promised, especially higher corporate taxes, as Congress will likely remain divided. Each of these news items would be a major boost to sentiment but taken together they are resulting in large and in some cases record-setting daily moves in several asset classes. Equities are up more around 4%, oil is up about 10%, and the Canadian dollar is up just below 1%. The move has pushed the US/CAD exchange rate to its highest level since September of 2019 and to just below our long term consensus forecast. While we view today’s reaction to the news of the day as justified, we remain cautious as there are headline risks to sentiment that could materialize any time and push the Loonie in the other direction.
