We started last week with news of a highly effective vaccine being developed by Pfizer. This week, we start with an even more effective vaccine in development by Moderna. The market’s reaction has been similar, though the moves have been more more muted in reaction to today’s announcement. The Canadian dollar is up 0.3% as oil has traded up 4% in reaction to the news. Equity markets are up but tech companies are trading down, as happened in response to last week’s news. An early picture of the end of the pandemic is emerging. We are going to see the end of the health crisis in the second quarter of 2021 as vaccination of priority groups begin. A lot of questions remain to be answered about the logistics of vaccine delivery and what percentage of the population will refuse to be vaccinated. The economic picture however remains murky. The tone of central banks, including the Bank of Canada has been dire. On the other hand, the macroeconomic data so far has shown a robust (yet incomplete) recovery. As these vaccines come on line and the health picture clears up, the markets’ attention will turn to (a) the pace and shape of the economic recovery and (b) the long term consequences of the pandemic on the economy, trading patterns, and consumer behaviour. The most important economic data points that could impact the USD/CAD exchange rate this week are the US retail sales numbers on Tuesday and Canadian inflation in October which will be released on Wednesday.
