Key Points from This Week

Pfizer Vaccine Receives UK Approval

Markets received a boost this week from news that the UK government approved the Pfizer/BioNTech vaccine. This is now the first vaccine to receive government approval and is expected to be followed shortly by the Moderna vaccine which has also been submitted for approval. Risk assets have rallied firmly in response to the news as traders begin to look ahead to a return to normal conditions next year.

Manufacturing Data Improves Further

Risk appetite was further bolstered this week by the latest set of manufacturing data out of the US, UK & EU. The factory sector was seen expanding over November, despite the return of nationwide lockdowns in many parts of Europe. With manufacturing activity continuing to rebound, the risk outlook has improved notably and looks set to keep high yield FX and commodities well supported in the near term.

Key Events Next Week

BOC Rate Statement

At the December BOC meeting next week, the market is not expecting any further adjustment from the central bank. However, risks are skewed to the downside and traders will be carefully noting the bank’s language to judge the likelihood of any further easing in the coming months.

ECB Rate Meeting

The ECB meeting next week is the main data focus and traders are widely expecting that the bank will announce further measures as it continues to combat low inflation in the Eurozone. ECB chief Lagarde has warned recently over the persistent lack of inflation and cited the bank’s own projections that inflation will not return to target until well into 2021. With the recent lockdowns across much of Europe having likely impacted activity, the market is expecting a further injection of stimulus at this point. The risks for the Euro are consequently tilted lower, however, if the ECB decides to refrain from easing at this point, we could see an adverse spike higher in the EUR exchange rate.

Keep An Eye On

Brexit Headlines

With a deal still not in place, time is running out for the UK and the EU. Political leaders on both sides have warned over the failure to agree a deal and with divisions still remaining on key issues, the risk of a hard Brexit appears to be growing daily. Traders are now waiting to see if the talks will be extended beyond the current deadline or if the UK is truly prepared to exit the EU without securing trade terms.

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